| UK
Interest Rate: 5.25%
UK
Interest Rates Forecast: Further 0.25% rise likely in
April or May
Bank
of England Leaves Interest Rates On-Hold In March
The
Bank of England's Monetary Policy Committee voted on
the 8th March to leave their base interest rate
unchanged for March. The decision was widely-expected,
especially given the recent turbulence in the global
financial markets.
Concerns
remain over price rises at the factory
gate and on the high street, as well as the level of
private sector pay settlements. However, the MPC may
well have decided to allow previous changes greater
time to work, and to wait until the contents of April's
budget are clear before deciding on another rate rise.
Rates
Likely To Peak At 5.5. Per Cent
Although interest rates did not rise
in March, most analysts expect at least one further
rise in the first half of this year. Howard Archer,
Chief UK Economist at Global Insight, believes that
rates will rise once more to 5.5 per cent in April or
May, and will then start to decline later in 2007.
Estate
agents Savills also believe that rates will not remain
above 5 per cent for long, expecting rates to settle
between 4 and 5 per cent in the longer-term.
Pay
Settlements Continue To Raise Pressure on Interest Rates
Despite
this month's decision to keep interest rates
on hold, pay settlements are continuing to add to the
case for a further rise in interest
rates. The reason for this is private sector pay, which
is rising at twice the rate of public sector pay –
recently subject to a subdued 1.9 per cent average settlement.
Pay
specialists IDS (Income Data Services) report that the
median pay settlement in the private sector
rose to 3.5 per cent for the three months to
the end of January, an increase of
0.5 per cent on the three months to December.
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