Interest rates rise to 5.75 per cent
Published On 5 July 2007
The Bank of England's Monetary Policy Committee (MPC) has opted to increase interest rates in July.The Bank revealed that interest rates would increase by 0.25 per cent to 5.75 per cent in order to try and curb spending and reduce inflationary pressure.
Although consumer price index inflation (CPI) fell back to 2.5 per cent in June, the MPC decided that a further interest rate increase was necessary.
A statement from the Bank said: "Although pay pressures remain muted, the margin of spare capacity in businesses appears limited and most indicators of pricing pressure remain elevated.
"Against that background, it further judged that an increase in Bank Rate of 0.25 percentage points to 5.75 per cent was necessary to meet the two per cent target for CPI inflation in the medium term."
Trevor Williams, a chief economist at Lloyds TSB commented that the decision to increase interest rates must have been a close call.
"Some MPC members probably wanted to hold out for more proof that another rate hike was really necessary, but there are others who believe the MPC has been too slow to raise rates," he explained.
"It's true that the economy is showing some tentative signs of a slowdown. But at the same time, house prices surged again last month, money supply growth continues to accelerate and the services sector remains robust."
