6 November 2006
Following rumours last week that the Monetary Policy Committee (MPC) might raise the interest rate, economic experts have now declared that the rise to 5% will be a certainty and most predict a further rise in February 2007 as the MPC tries to bring rising inflation under control.
The inflation rate had dropped in September to 2.4%, due in part to the drop in petrol price, but analysts had expected it to fall further.
An interest rate rise would also affect those struggling to pay off loans or credit card debts as a rise would make repayments harder for them.
Accounting firm BDO Stoy Hayward, told the Times: "The impact of the expected November interest rate rise will test the resilience of the UK consumer," and that this worried business people who operated in the service sector.
Owners of small businesses are also likely to suffer the negative effects of an interest rate rise. Oxford Economic Forecasting, an independent analyst, said a 5% base rate would slow Britain's gross domestic product (GDP) growth by 0.3%.
"We are not forecasting economic meltdown with rates at 5%, merely weaker growth than perhaps there needs to be," Adrian Cooper, its managing director, told the Independent.
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