London, April 4 (Bloomberg) -- The Bank of England is likely to cut interest rates tomorrow as evidencegathers the economy won't be able to avoid the effects of a slowdown in the U.S., analysts said. Fifteen of the 24 economists surveyed by Bloomberg News expect the bank's Monetary Policy Committeetocut the benchmark securities repurchase rate a quarter of a percentage point, to 5.5 percent, at its Aprilpolicy meeting. The meeting begins today and ends tomorrow at noon. Inflation has been below the government's target for almost two years, and recent reports suggest theeconomy is slowing. Analysts said Britain is starting to feel the effects of a slump in the U.S. ``The global economic environment continues to deteriorate,'' said Nick Stamenkovic, an economist at Nomura Securities. ``Inflation is very benign in the U.K., so the bank has room to take out an insurancepolicy by cutting rates.'' A quarter-point rate cut would be the second this year; the central bank also cut rates in February. With anuncertain outlook for both the U.S. and the U.K. economies, further cuts are likely. Britain sells almost 15percent of its exports to the U.S., and Americans are the country's largest foreign investors.
Seeking Stability
Slower growth could eventually pull down prices, and price stability is the Bank of England's main concern.The central bank's mandate is to keep the annual increase in consumer prices, minus mortgage interestpayments, within one percentage point either way of 2.5 percent. Annual price increases have held below the 2.5 percent target for the past 23 months. In January and February, they fell below 2 percent. Without a rate cut, inflation looked as if it would soon breakthrough thebank's 1.5 percent lower limit. As a result, investors have long predicted rates would drop. The implied yield on three-month interest-ratefutures contracts, a gauge of rate expectations, fell below the bank's benchmark rate at the end ofNovemberand has stayed there ever since. Recent economic reports generally confirm growth is slowing. Industrial production was unchanged inJanuary and fell in December. Wholesale prices fell in February and January. Just this week, a report fromthe Chartered Institute of Purchasing and Supply showed manufacturing activity slowed in March, with indicators ranging from factory output to new orders to stockpiles of finished goods registering declines. ``The British economy is showing signs of slowdown, and international economic developments willundoubtedly further depress economic growth here,'' the Institute of Directors said in its analysisof thesituation confronting the Bank of England. And continental Europe probably won't take up the slack left by the U.S. European Union policy makerstalked confidently earlier this year about a healthy Europe outpacing the faltering U.S. Now both business and consumers are losing confidence -- a report this week showed optimism declined during March in the 12 nations sharing the euro, marking the third straight monthly decline. The EUis thesource of more than half of Britain's trade, so slower growth in the euro zone could affect the U.K. even morethan a faltering economy in the U.S.