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Interest rates expected to fall after "shock" US cut

The Bank of England is expected to reduce interest rates in February following the US Federal Reserve's decision to cut rates to 3.5 per cent across the Atlantic, a financial expert has said.

According to the Guardian, the US cut is the biggest in 20 years, outstripping the intervention during the 1987 stock market crisis.

And although David Kuo, head of personal finance at fool.co.uk, said reductions here "may not be as dramatic", consumers can still expect a quarter-point to be knocked off the base rate next month.

Mr Kuo predicted the cut after the Bank's governor, Mervyn King, said inflation was being dampened by the current rate of 5.5 per cent.

"I think that if you read between the lines Mervyn King is hinting that the monetary policy committee will cut interest rates in February," Mr Kuo said.

Such a move would potentially affect people with variable rate loans and mortgages, as lenders may pass on the cut to borrowers.