21 December 2006
The probability of interest rate rises early in 2007 increased sharply following calls for such a move from the International Monetary Fund (IMF).
Further interest rate rises would see consumers paying back a higher level of interest on their credit card repayments, which could hit those who have just taken out a card offering interest free purchases and free balance transfers harder than they were expecting.
According to the Times, the IMF said soaring energy prices may be leading people to anticipate higher inflation and that the Bank of England (BoE) could be forced to push interest rates higher if wage deals accelerate, as they are predicted to do in the year.
The IMF's fears echoed those made by the BoE's monetary policy committee (MPC) last week, when the minutes from its recent meeting showed the members believed that "while inflation was still projected to fall back in 2007 as the effect of higher energy prices faded, the committee remained concerned that the pick-up in the near term could affect forthcoming pay increases".
Other negative aspects of City economists' reports showed that the previous rate rises had not had any significant effect on the British public's desire to take out further loans to fund their spending.
These included a report by the British Bankers' Association which showed that credit card lending rose by £66 million in November, in contrast to an average monthly fall of £248 million over the past six months.