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Experts split on further rate rises

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05/02/2007

 

Will they or won’t they? Opinion is divided on whether the Monetary Policy Committee (MPC) of the Bank of England will vote to keep interest rates on hold, or to increase them by 0.25%, when it meets this Wednesday.

Following last month’s surprise 0.25% hike, some are convinced that the MPC will give the economy a breather this week.

 The self-styled ‘shadow’ MPC, which sits at the Institute of Economic Affairs, has correctly predicted the last three increases in rates, including the January rise that shocked most people. Voting this week, it narrowly called for no change.

The City tends to think overall that there could be a rate rise announced this Thursday, but that it is more likely to come later in the spring.

On the other hand, BDO Stoy Hayward, a compiler of business surveys, claims that inflation expectations have jumped to their highest level since 2004.

It says a rate rise this month “while the economy is able to absorb it, is the most likely option.”

There have been three rate rises of 0.25% since last August, adding an extra £45 to the cost of a typical £100,000 mortgage.

The UK’s savers, who outnumber borrowers five to one, have benefited from the increases.

 

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