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UK Interest Rate: 5.00%
UK
Interest Rates Forecast: Almost certain to rise to 5.25%
in February
Booming
Service Sector Points to Rate Rise
Britain's
service sector companies are booming, according to figures
recently released by the Chartered Institute of Purchasing
and Supply (CIPS). The figures reveal that the service
sector, which includes hotels, restaurants and financial
service companies, is enjoying its highest levels of
activity and growth for nearly 10 years
– since Labour came to power in 1997.
The
rate of job creation by the sector is also the fastest
since August 1997, raising concerns over inflationary
pressures on wages, as companies compete for the best
staff. The service sector makes up two-thirds of the
economy and has a significant influence on growth
rates.
Along
with the continued strength of the housing market,
these latest figures suggest that a rise
in the Bank of England's base interest rate
in February is now more likely than ever, as the Bank's
Monetary Policy Committee seek to bring inflation levels
down.
Rates
to Rise to 5.25 per cent in February
Experts
are predicting that the Bank of England's Monetary Policy
Committee will leave interest rates
unchanged in January but will prepare the ground for
a rise in the base rate to 5.25 per cent in February.
Howard
Archer, chief economist at Global Insight, noted that
"There is undeniably a strong possibility that
the Bank of England will lift interest rates to 5.25
per cent in the first quarter as a precautionary measure."
Although
most economists agree on the likelihood of a rise, some
believe that the Bank may be able to drop interest
rates again later in the year. Ed Stanfield
of Capital Economics commented that "There may
be a chance that in the last quarter of 2007 that rates
will begin to come down".
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