UK
Interest Rate: Unchanged at 4.75%
UK
Interest Rates Forecast: 0.25% increase in November
Interest
Rate Rises Look Inevitable
A
rise in rates to 5% in November now looks almost
certain, with the possibility of a further rise to 5.25%
in 2007. That's the opinion of two leading economic
think tanks, according to forecasts
published this week.
The
National Institute of Economic & Social
Research believes that in order to bring inflation
back down to its target of 2% by the end of 2007, rates
will need to rise to 5.25% sooner rather than later.
This
outlook was supported by Ernst & Young's
ITEM Club, which is the only economic group
to use the Treasury's own economic model for its forecasts.
The
ITEM Club believes that a rise to 5% in November, probably
followed by a further 0.25% rise in
2007 will be necessary to manage inflation successfully,
and avoid excessive upwards pressure on wages, which
could endanger growth.
ITEM
club chief economic advisor , Peter Spencer, also addressed
the issue of affordability in the housing market,
adding that "If house prices continue
to accelerate, interest rates will have to rise further
in 2007."
|
