CBI: Interest rate rise set for autumn

Posted: 19 Jun 2007 10:52:36 GMT

The Confederation of British Industry (CBI) has suggested that interest rates are likely to rise again this autumn.

The Confederation of British Industry (CBI) has suggested that interest rates are likely to rise again this autumn.

The Bank of England's monetary policy committee (MPC) has raised the base rate four times since August last year in an effort to keep a lid on rising inflation levels, but the CBI believes a further increase will be needed to bring inflation down to its target level of two per cent.

"Though not a foregone conclusion, a further interest rate rise now seems more likely than not this autumn," explained Ian McCafferty, chief economic adviser at the CBI.

Mortgage holders are already believed to be suffering under the strain of the recent interest rate rises, particularly first time buyers as many of them stretched their budgets to get onto the property ladder in the first place.

However, the CBI's quarterly economic forecast predicts the UK economy will enjoy good growth over the course of 2007, meaning a further increase in interest rates will be necessary to ensure inflation does not start to rise too much.

Mr McCafferty suggested that the higher cost of borrowing during the first half of 2008 will bring inflation down sufficiently to enable the MPC to bring interest rates back down to 5.5 per cent during the second half of next year.


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