Have interest rates peaked?

Posted: 02 Aug 2007 11:44:43 GMT

Interest rates may have peaked at their current level of 5.75 per cent.

Interest rates may have peaked at their current level of 5.75 per cent.

That is according to a leading economist from UBS who says that the Bank of England has done enough to curb inflation.

Speaking on BBC Radio Five Live's Wake Up to Money programme, Paul Donovan said that he does not expect another rate rise when the bank's Monetary Policy Committee (MPC) announces its decision on August 2nd.

"We think that the bank has probably done enough, that they don't need to raise again, that the economy will flow of its own volition because of the rate hikes that we've already had," he said.

However he did cast some doubt on his own prediction, adding: "The problem with this is that there is a delayed reaction to rate hikes because of the structure of fixed-rate mortgages and so on and so forth.

"So it's not entirely clear whether that slowdown is going to come quickly enough for the Bank of England."

Most analysts have predicted that the MPC will maintain rates at 5.75 per cent, although many believe that one further rise will be introduced before the end of the year.

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