| UK
Interest Rate: 5.75%
UK
Interest Rates Forecast: Increase to 6% likely later
this year
Bank
of England MPC Vote 6-3 for July Rise - Is the End Near?
The
minutes of the July meeting of the Bank of England Monetary
Policy Committee meeting were published this week, revealing
a more dovish outlook than previously seen.
Although
the committee voted 6-3 in favour of the rise in base
rates to 5.75%, there was a sense that further rises
may not be so inevitable. John Wraith, interest
rate strategist at RBS, took the view that
the minutes signalled that the end of the rises might
be in sight:
"It's
becoming a more even debate and reflects the view they're
nearly done: we're not talking about several further
tightenings ahead."
Most
analysts still believe that a further rise to 6% is
likely later this year, but the likelihood of further
rises is unclear.
Oil
Prices Help Push Inflation Upwards
Although
interest rates might be nearing their
peak, inflation is proving stubbornly resistant, not
least thanks to record oil prices.
There
are concerns that this could lead to as much as a 0.5%
increase in inflation in the coming months - and although
high oil prices ultimately lead to a reduction in consumer
spending, the rise in inflation could support the case
for further interest rate rises.
The
markets are expecting oil prices to stay high for the
rest of the year, and Karen Ward, chief UK economist
at HSBC believes this could lead to higher rates for
everyone:
"Unless
it's very clear that consumers are reacting to higher
rates and higher prices, then the Bank of England are
going to take a hard line, and there will be more rate
hikes on the back of it."
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