| UK
Interest Rate: 5.25%
UK
Interest Rates Forecast: Rate increase in May –
0.25 or 0.5 per cent?
Strong
Retail & Manufacturing Figures Increase Rate Pressure
A
new survey from the CBI has revealed that Britain's
retailers are enjoying some of the best trading conditions
for nearly two years.
64
per cent reported increased sales in the first half
of April, with only 20 per cent reporting a drop in
sales. This gives a positive balance of 44 – the
highest such balance since May 2004.
UK
manufacturing businesses are also feeling confident,
implementing near-record price increases during April
– a statistic which is likely to raise inflationary
concerns with the Bank of England's Monetary Policy
Committee.
This
combination of strong business results could increase
pressure on the MPC to consider a 0.5 per cent increase
in interest rates this month, rather
than the widely expected 0.25 per cent.
Howard
Archer, Chief UK Economist at Global Insight, commented
that, "we now expect interest rates to reach 5.75%
in the third quarter."
Leading
Think Tank Call For Rate Rise To 5.75pc
A
leading economic think tank, NIESR (National Institute
of Economic & Social Research) has called for the
Bank of England to increase interest rates
to 5.75 per cent when the MPC meet on the 10th May.
NIESR
believes that such a move is necessary to guard against
excessive wage inflation. Wage settlements are often
based on the RPI (Retail Price Index) measure of inflation,
and this is currently at a 16-year high of 4.8 per cent,
resulting in increased wage demands.
NIESR
also commented that they thought CPI inflation, the
government's preferred measure, would remain above its
target 2 per cent level for another year.
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