Warnings of 5.75% interest rate

Posted: 19 Apr 2007 10:55:33 GMT

The Bank of England monetary policy committee (MPC) is now likely to raise rates further than 5.5 per cent, according to economists studying this week's inflation statistics, which including a Consumer Prices Index (CPI) rate above the government's target range.

The Bank of England monetary policy committee (MPC) is now likely to raise rates further than 5.5 per cent, according to economists studying this week's inflation statistics, which including a Consumer Prices Index (CPI) rate above the government's target range.

Interest rate rises, which may affect sellers by slowing the housing market down, were labelled as something the latest inflation data "essentially guarantees" by Global Insight economist Howard Archer, who went on to tell the Guardian that while he did not expect the MPC to raise the base rate by more than 0.25 per cent in May, an increase to 5.75 per cent was on the cards this year.

The Financial Times made the same prediction as Mr Archer, while some analysts have argued that the MPC may take the unprecedented step of making a 0.5 per cent hike next month, Thrifty Scot reports.

Meanwhile David Brown, an economist at investment brokers Bear Stearns told the Guardian the company expected three further rate rises of 0.25 per cent this year, taking the base rate as high as six per cent.

This month's CPI figures obliged Bank of England governor Mervyn King to write an open letter to chancellor Gordon Brown outlining how the MPC proposed to tackle the inflation issue.


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