The BOE left their benchmark interest rates unchanged at 5% at last weeks meeting, as they look to gauge inflation risks.
The BOE will this week reveal a grim forecast of risky inflation and sharply weakening economic growth for the coming months. The closely watched quarterly inflation report will leave the door open for further interest rate cuts.
The banks report comes as the British Chamber of Commerce (BCC), in its new economic forecast, warns that Britain will skate close to recession over the next six to nine months, with quarterly growth remaining just above zero.

The housing market is still in turmoil, house prices are expected to drop by 14% over the next year and they could take a decade for the prices to reach the highs of 2007 according to some property brokers.

We should see a volatile week coming with the first 3 days of the week seeing the release of some reasonably significant data which includes the Trade Balance for March due for release Monday, CPI for April on Tuesday and the Bank of England’s Quarterly Inflation report released on Wednesday.

To sum up, there is a gloomy outlook for sterling as it is strongly believed that there will be a further two rate cuts before the end of the year, the first expected next month of at least 25 basis points. It is possible we may see 75 basis points cut before the end of 2008.