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BankruptcyNews
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 Posted - 02 July 2007 : 09:51:38
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UK interest rates tipped to rise
UK interest rates are expected to go up to 5.75% this week as the Bank of England moves to combat inflation.
The Bank's Monetary Policy Committee (MPC) is due to make its latest monthly rate decision on Thursday.
While rates were kept on hold at 5.5% in June, minutes revealed that four of the nine MPC members, including Bank governor Mervyn King, wanted a rise.
Although UK inflation fell to 2.5% in May, it still remains above the government's 2% target.
Spending concerns
Mr King said last month that people should expect higher interest rates by the end of this year unless consumers and companies slow spending.
He said the Bank was concerned that spending was rising faster than the economy's ability to cope with the higher demand, and said that "more persistent inflationary pressures have picked up".
Global Insight chief economist Howard Archer said that he assumed that the four MPC members in favour of higher interest rates in June would maintain that view at the July meeting.
"This means that it will only need one of the five 'no change' MPC camp to switch sides to trigger an interest rate hike," Mr Archer said.
Despite the predicted rise, business leaders have urged the Bank not to raise interest rates this week.
The EEF business group pointed to the fact that while inflation remains above the government's target, it is now falling, thanks to the four increases in interest rates since last August.
"We have supported the Bank all the way through the current cycle of increases," said EEF chief economist Steve Radley.
"However, we now believe that there are indications that the medicine applied so far is beginning to take effect and the case for another rise is not made."
Source: bbc.co.uk
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UK interest rates tipped to rise
