Six per cent interest rates 'likely'
Published On 9 August 2007
The Bank of England has signalled that interest rates could increase to six per cent before the end of the year.In its quarterly inflation report, published today (August 8th), the Bank argued that current interest rates will not bring inflation down towards government targets within the next two years.
Even though the Bank's Monetary Policy Committee (MPC) has already increased interest rates five times since August 2006, the new report said that the outlook for inflation still remains "highly uncertain".
Manufacturing outlooks and consumer confidence have remained robust in the face of the interest rate increases, prompting the Bank to warn that more could be on the way.
At a press conference, Bank of England governor Mervyn King explained: "The committee judges that there continues to be greater-than-usual uncertainty about the outlook for inflation.
"Overall, the balance of risks to inflation around the central projection two years or so ahead is, in the committee's judgment, a little on the upside."
Commenting on the data, Ian Kernohan, an economist at RLAM, said: "Whether rates go up in September or October is less important than the effect which six per cent rates are going to have on the economy, particularly the housing market.
"The economy is going to slow next year and the speed at which this happens could affect the timing of the next election."
