Budget could further ease rate fears

The catastrophic events in Japan have contributed to a reassessment of the likely path of UK interest rates that was already underway before the tragedy struck. Nonetheless, a strong signal from the Government in Wednesday’s Budget that it intends to press ahead with one of the biggest fiscal squeezes in modern history against a backdrop of deep economic uncertainty both at home and abroad would further hammer home the message that monetary policy needs to remain extremely supportive for a prolonged period yet.