PRESSURE on borrowers and business may ease later this year with two anticipated cuts in interest rates, according to a leading economist.

Dennis Turner, chief economist with HSBC Bank, told more than 150 Kent and Medway business people that the Bank of England Monetary Policy Committee might well cut base rate twice in the next six months – in May and September.

He forecast a quarter per cent on each occasion, taking the rate down to four per cent. Mr Turner spoke about his concern for the UK economy which showed increasing signs of weakness.

Apart from a late pre-Christmas surge, consumer spending had slowed, unemployment was rising and the number of unfilled vacancies had fallen. Consumer debt was at record levels and rising taxation had left people with less money to spend on the high street. Consumers were also diverting money to paying off credit card bills.

With less consumer spending, projected economic growth would be two per cent or less, Mr Turner predicted.

"It will need a base rate of two to inject a bit of life into the system," he said at the Ramada Hotel and Resort in Hollingbourne, near Maidstone.

"I don’t see anything happening this side of the Budget, which means April at the earliest. It may even be May. If you pencil in something for May and then perhaps September, we’ll be looking at four per cent by the end of this year."

He added: "The weakness for the UK economy is what happens to the consumer in 2006. The Christmas spending numbers on the high street were surprisingly good, although it will be interesting to see whether volume sales convert into profit for the retailers. I’m not entirely sure how much discounting there was."

The rising number of public sector jobs, with consequent lower rates of productivity and high long-term pension liabilities, was also a worry, Mr Turner said.

"All of this squeezes the wealth-creating part of the economy. We did it in the 1970s and we lived to regret it."