10 November 2006
Yesterday the Bank of England's monetary policy committee (MPC) confirmed that it was raising the base rate of interest from 4.75% to 5%.
The quarter point rise will be good news for savers, but could cause problems for consumers who owe debts or have taken out secured or personal loans.
In a statement accompanying the decision, the Bank also warned that inflation was likely to rise further above its 2% target in the near term, but then fall back as energy and import price inflation cools.
The decision has evoked both praise and criticism from banks, politicians and finance advisors. Trevor Williams, chief economist at Lloyds TSB, commented: "It's best to act now early to keep inflation low, rather than having to act later and do more. That would cause much more damage to borrowers."
Others have condemned the move as being premature, with Liberal Democrat Vincent Cable arguing: "People are now facing a three pronged attack from rising interest rates, rising unemployment and record levels of personal debt."
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