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Will British Gas Price Hike Push Bank To Increase Rates?

While the consensus for this week's Bank of England meeting has for some time been a 'no change in interest rates' stance there is a growing concern that the recent rise in energy prices by British Gas may force the Bank to increase rates to combat inflation. Even though the increase has nothing to do with inflation, and more to do with the price of oil and energy prices in general, there is a feeling that the Bank of England may look to stamp their authority on the situation.

Many observers believe that the Bank has been looking for an excuse to raise rates and the move by British Gas may be the chink of light they were looking for. By claiming that they are looking to combat inflation this will take some of the pressure off the Bank and allow them to step forward as the people's champion. As the immediate direction of the economy is still uncertain this prolonged period of confusion needs to be sorted sooner rather than later.

A sharp rise in interest rates would hit the consumer very hard and push many businesses over the edge but it may allow the economy to bottom out and start to rebuild.

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