3 July 2006
Anyone thinking of taking out a loan has been handed some good news after a report suggested interest rates look set to stay put until the end of the year.
Accountancy and business advisory firm BDO Stoy Hayward suggested that this would be the case despite the fact that consumer price inflation hit 2.2% in May, above the Bank of England's 2% target.
With inflation above official targets, an increase in interest rates would be an obvious result. The company foresaw an above average growth of 3.5% in the fourth quarter of 2006.
"There has been widespread speculation about whether interest rates will increase in July to combat rising inflation. But we predict that the MPC (Monetary Policy Committee) will adopt a 'wait and see' approach, not just this month, but for the rest of 2006," said Peter Hemington, partner at BDO Stoy Hayward.
"This will allow the committee to assess the full impact of recent fluctuations in the world financial markets on the UK economy and monitor any future falls in the value of the dollar."
Douglas McWilliams, chief executive of the centre for economics and business research, added: "The Bank of England has already factored in volatile inflation this year, and is therefore unlikely to change interest rates whilst the pace of economic growth over the next year remains uncertain."
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