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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.

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