30 January 2007
One of the leading thinktanks, the National Institute for Economic and Social Research (NIESR), has said that inflation will not fall as quickly as previously predicted.
This is bad news for debtors as it means that interest rates are likely to suffer a further increase in the coming months, with NIESR suggesting that it could go as high as 5.50% with another increase predicted for later in the year.
"Hopefully the January hike plus one more [rate increase] will be enough," Ray Barrell, senior research fellow at the NIESR, told ABC Money.
"Earlier rate hikes mean smaller rate hikes," he said, adding that the Bank of England should have gone for a half-point increase back in November, when it only delivered a quarter point increase.
The thinktank also predicted that recent increases in interest rates and the associated change in expectations of interest rates over the past year would be enough prevent any extravagant wage rises, which would also serve to lower the inflation rate.
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