Another rates rise on the cards
The Bank of England has hinted that interest rates may have to rise again, if inflation is to be brought down to two per cent.The latest Quarterly Inflation Report said a rise in interest rates would help to curb the rate of inflation, which is predicted to grow because of more expensive oil prices and the impact of flooding on food prices. The report suggested that inflation could come back down to two per cent by 2009 if rates "move in line with market expectations". Inflation stood at 3.1 per cent in March, but fell to 2.4 per cent in June, which the Bank attributes to a fall in electricity and gas prices, but warns is a trend that cannot be expected to continue unless interest rates were to go up again.If the quarter-point rise in interest rates to six per cent that the City is predicting were to go ahead, it would be the sixth hike this year. Mervyn King, the Bank's governor, said at a press conference that it was "a foolish game to sit down now and say we know what interest rates are going to be". It is thought that a rise to six per cent would trigger a slow-down in the housing market, and also a rise in the number of repossessions and insolvencies, in part due to the number of people who will be facing higher mortgage repayments as their cheap fixed-rate deals expire.
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