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Rates to be maintained at 4.5%

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02/05/2006

Experts believe that The Bank of England will keep interest rates steady at 4.5% this week for the ninth consecutive month.

The Bank’s Monetary Policy Committee (MPC) that decides the Bank Base Rate is concerned that rising energy costs are exacerbating expectations of higher household inflation.

After the Bank’s latest survey of expectations of future inflation among the public showed a sharp rise to an annual rate of 2.7 per cent, the MPC is likely to be concerned that this trend is being fuelled by rising energy bills and could trigger higher pay demands, adding to real inflationary pressure.

Keeping inflation expectations among households and firms closely anchored to the Bank’s 2% inflation target is a central element in its strategy for controlling price pressures.

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