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Interest rates set to stay at 5.5 per cent

Interest rates are expected to be held at 5.5 per cent when the Bank of England announces its monthly decision tomorrow.In May the Bank's monetary policy committee (MPC) voted unanimously to raise base rates a quarter of a percentage point to 5.5 per cent.The decision came on the back of consumer price index (CPI) inflation reaching a ten-year high of 3.1 per cent earlier this year â€" the first time it had breached the three per-cent barrier since the Bank was given independence in 1997.Although inflation has since subsided to 2.8 per cent, it remains above the government's target measure of two per cent.And with the MPC aware of the Bank's inflation report, which will be published five days after tomorrow's rate decision on June 12th, the prospect of a further 0.25 per cent rise remains real.In addition, in minutes accompanying last month's decision the MPC admitted it had considered a half a percentage point rise.The committee's decision is clouded further by unstable retail figures and a cooling property market being set against high consumer confidence and strong manufacturing demand.Nationwide today revealed that according to its consumer confidence barometer, optimism was at its highest for 18 months."The good weather in early May might have helped put consumers in a brighter mood but, people's spending intentions responded sharply to the latest interest rate announcement; this may offer some comfort to the MPC," said the building society's chief economist Fionnuala Earley.

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