LONDON  - The British pound hit a two-year low point against the dollar on Friday as dealers predicted interest rate cuts from the Bank of England to combat flagging economic growth, analysts said. Sterling slumped to 1.8512 dollars " the lowest point since July 26, 2006. It later Friday stood at 1.8530, from 1.8677 in New York on Thursday. The pound has shed more than 12 percent in value since hitting a 26-year high of 2.1161 dollars on November 9. The British currency dived lower this week after the Bank of England issued a gloomy economic outlook. The central bank had Wednesday said that British inflation could fall sharply toward the government's target of 2.0 percent from early 2009, which prompted traders to bet on interest rate cuts sooner than previously expected. Barclays Capital analysts have said that they now expect quarter-point rate cuts in Britain in November, February, April, and May. "The surprise was not so much that the next move in rates is likely to be down " that has been our forecast for some time " but that the (central bank) seems happy to nurture this expectation," Barclays Capital analyst Simon Hayes said on Friday. Meanwhile, the dollar hit a near six-month high against the euro Friday on speculation that the European Central Bank would begin cutting interest rates next year to boost the shrinking eurozone economy. In morning trade, the European single currency sank as low as 1.4698 dollars " the lowest point since February 20. It later stood at 1.4716, down from 1.4824 late in New York on Thursday. The dollar rose to 110.58 yen from 109.66 after earlier touching 110.66 " a high against the Japanese currency last seen in January. The greenback regained the key 110-yen level after a spike in US consumer price inflation sparked talk of Federal Reserve interest rate hikes, which could make the dollar more attractive to investors. In London trading on Friday, the euro changed hands at 1.4716 dollars against 1.4885 late on Thursday, at 162.73 yen (163.10), 0.7943 pounds (0.7969) and 1.6187 Swiss francs (1.6190). The dollar stood at 110.58 yen (109.57) and 1.1000 Swiss francs (1.0877). The pound was at 1.8530 dollars (1.8677).