9 August 2007
Interest rates could rise to 6% in the coming months in order to manage rising inflation, a Bank of England (BoE) report has suggested.
The BoE's Quarterly Inflation report hinted that inflation could return to the figure of 2% by 2009, if interest rates "moved in line with market expectations".
But city analysts' views differ as to when this rate rise from the current figure of 5.75% may take place.
Commenting on the report Howard Archer, Chief UK and European Economist for Global Insight believed the rate rise could happen in the next few months.
"The impression we get from the Quarterly Report and Mervyn King's accompanying remarks is that interest rates are more likely than not to rise to 6% in the autumn, but the BoE is in no immediate hurry to raise interest rates again given the current major uncertainties surrounding both the inflation and growth outlooks," he explained.
"We believe that 6% is likely to be the peak in interest rates as we anticipate some moderation in consumer spending and overall growth during the second half of the year will gradually dilute underlying inflationary pressures.
"However, we suspect that the Bank of England will keep interest rates at 6% for an extended period," he added.
Yet Trevor Williams, Chief Economist for Lloyds TSB corporate markets, said he did not think another rate rise would be on the cards that soon.
"I don't think the Bank of England (BoE) will raise interest rates to 6% in September," he said.
"There will be a sharp slowdown in consumer spending, and I think rates will be cut next year," he predicted.
Interest rates have risen five times since last August in an attempt by the Bank of England to reduce inflation to a target of 2%.
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