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UK Interest Rates Forecasts and Predictions for Home and Property in the UK at 22th November 2006
| UK Interest Rate: 5.00% UK Interest Rates Forecast: Likely to rise in February/March 2007 Bank of England Base Rate Increased to 5.00% On Thursday the Bank of England's Monetary Policy Committee (MPC) increased the Bank's base interest rate to 5%, in a widely-predicted move intended to dampen inflation and reduce upwards pressure on wages and house prices. Inflation presently stands at 2.4%, and the MPC were concerned that recent falls in oil prices had not led to a greater reduction in inflation levels, as has been the case elsewhere in Europe. This suggests that UK companies have used the slack to increase prices in other areas. In addition to continued strong growth in the housing market, utility bills have also risen sharply this year with an average increase of 27% for electricity and 40% for gas. Upwards pressure on wages has continued as well, with Ford recently agreeing an above-inflation 4.25% pay deal for its UK employees. A Mixed Picture Despite overall strong growth in the economy, the MPC described consumer spending as only "moderate" and noted disappointing manufacturing performance and a fall in exports over the summer. Some commentators are concerned that interest rate hikes will hurt manufacturing industry and lead to potential job losses. Interest Rate Predictions No clear consensus has yet emerged on future interest rate changes. While many economists expect a further 0.25% rise in February or March next year, this is by no means certain and will in part depend on the Bank of England report on inflation, due out this week. Indeed, some economists believe a return to a rate of 4.75% will be necessary to maintain economic health – David Millar, Head of Bond Strategy at Scottish Widows Investment Partnership, says that markets have already factored in this week's widely-predicted rise, and believes no further rate increases will be necessary in 2007. |
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