AMI quarterly economic bulletin sums up market

Richard Farr, director of AMI, said: "With continuing volatility in the financial markets and steep rate cuts by the Fed, the UK will also look at reducing rates. However, as the Bank of England recognise, it is a difficult balance keeping inflation under control with increasing energy, food and fuel prices and at the same time looking to cut rates to boost the economy.”

Key highlights of the latest report include:

Money markets . Money markets still volatile with record early 0.75% Fed rate cut

. Coordinated central bank action and rate cut spur confidence

. Credit supply now much more restricted and securitisation markets are closed

Inflation . Inflation close to target but is likely to be volatile

. MPC must balance inflationary pressures from weaker pound and higher food and fuel with deflationary effect of slower economy

. Interest rates nevertheless set to fall further

Mortgage Market . Housing market is slowing down

. Lower transactions are more likely than sharply falling house prices

. Remortgaging will hold up better, even if borrowers do not seek to withdraw equity from their homes to the same degree

. Falling interest rates will boost confidence in the second half of the year