Experts in no doubt over rate rise
When the monetary policy committee (MPC) meets next Thursday, experts have said that a hike in the interest rate is inevitable if the bank is to quash inflationary pressures.Howard Archer, senior economist at Global Insight said that although a rate rise was definitely on the cards, it was impossible to predict whether the MPC will favour a quarter point rise or double that, which would take the interest rate to 5.75 per cent.The bank has not raised rates by half a percentage point since 1995, which leads people to assume that next week the rate will only be increased to 5.5 per cent.However, it is well reported that the bank is not meeting its inflation target and Mr Archer believes that another quarter point rise could be expected later in the year.He said: "Back-to-back hikes in May and June are a very real possibility, particularly if consumer price inflation comes in at three per cent or above in April and there is ongoing evidence that firms are becoming more confident in their pricing ability and seeking to push through more price hikes."He added: "The Bank of England would undoubtedly like to see house prices lose some of their buoyancy. Consequently, we suspect that a majority of MPC members will want to take out some extra insurance against longer-term inflation risks by following a 25 basis point interest rate hike to 5.50 per cent in May with another move to 5.75 per cent in the third quarter.""While we would not rule out interest rates eventually reaching six per cent, we forecast 5.75 per cent to mark the peak," Mr Archer concluded.
Share this..
Related stories
Renewed rise in inflation puts pressure on savings
News this week that inflation has picked up to 1.5% from 1.1% has been broadly welcomed by analysts and researchers because ultimately it means in the short term that the UK economy is showing signs of life. However, putting aside the potential problem of increased inflation, there is also concern for those with significant savings in the UK who are currently attracting minimal interest rates....
Read MoreIs the worst yet to come for the UK economy?
With more than 140,000 companies in the UK falling into financial trouble in the final quarter of 2009 there is a stark warning today that the worst of the UK economic downturn may be yet to come. While that is not to say that the UK economy is not starting to recover, the aftermath of what has been the worst economic downturn since the 1920s has still not hit home in many areas of the UK economy....
Read MoreDavid Cameron could scrap 50p top tax rate
David Cameron has taken a chance with UK voters by suggesting he would look to reverse the UK government's 50p top tax rate if it were shown to raise no money. While his comments have been applauded by Conservative supporters to the right of the party, there is no doubt that the Labour Party will use this to confirm that the Conservatives will look to reduce the tax burden for higher earners in th...
Read MoreDamning report issued into UK banking collapse
The Treasury Select Committee has this week issued a damning report into the UK banking system and the recent near collapse of the sector. Citing the uncontrolled surge in bonus and remuneration payments the committee has ultimately left the blame for the near collapse at the door of UK regulators. However, despite public uproar and the fact that nationalised banks are paying significant bonuses t...
Read MoreCadbury investor could bail out at 820p a share
Unofficially it is believed that at least one of Cadbury's top-10 institutional shareholders would consider an offer in the region of £8.20 a share for the UK chocolate maker. This comes just hours after Cadbury issued a relatively upbeat trading statement although on reflection some analysts are concerned that the upbeat statement may just be a little shy of what is required to beat off the pote...
Read More