Warning: Labour in-fighting could stall interest rate cuts

THE Bank of England could be prevented from making further interest rate cuts because of divisions in the governing party, a leading City broker has warned.

- By Mauricio Alencar

Berenberg has suggested a Labour U-turn on proposed spending cuts could force the Bank to keep interest rates stay higher for longer.

It comes as some £4.8billion in welfare budget savings look set to be watered down after a revolt by 126 Labour backbenchers.

And Berenberg economist Andrew Wishart said the Government's failure to control public spending will either lead to higher tax rises which would "stymie business confidence", or a rewriting of fiscal rules, which would "roil the gilt market" and lead to higher interest rates.