| UK
Interest Rate: 5.25%
UK
Interest Rates Forecast: Further 0.25% rise still likely
in April or May
A
mixture of news this week – from the MPC's dove-like
behaviour on one hand, to rising inflation on the other.
What does it mean for interest rates?
MPC Minutes Suggest Only One Rate Rise To Come?
The
minutes from the March meeting of the Bank of England
Monetary Policy Committee, published this week, provided
some surprises for analysts in the city, who have started
to reconsider their interest rate forecasts for the
rest of the year.
It
appears that the committee voted 8-1 in favour of holding
interest rates in March, with one member,
Professor David Blanchflower, voting against a rise.
The
real surprise was that no one voted in favour of a rise
– most city experts had been expecting a 7-2 vote,
with seven holds and two votes for an increase to interest
rates.
This
suggests that the MPC may not be as eager to put up
rates again as had been thought, although the latest
inflation figure suggest that at least
one more rise is likely.
Inflation
Up Again – Interest Rates To Follow?
The
latest official inflation figures, covering February
2007, reveal that both RPI and CPI inflation have risen.
The RPI (Retail Price Index) measure rose to 4.6 per
cent in February, its highest level in sixteen years,
and 0.4 per cent up on January's rate.
The
government-preferred CPI measure, which excludes items
such as mortgage interest and Council Tax, also rose
from 2.7 per cent to 2.8 per cent. It had been expected
to remain unchanged, and these increases will make another
increase to interest rates more likely
in coming months, as the Bank of England endeavours
to drive CPI inflation down towards the government's
2 per cent target.
Mortgage
Lenders Reduce Fixed Rates
In
a sign that mortgage lenders are not expecting many
more interest rate rises, some lenders
have begun to reduce the interest rates on
their fixed rate mortgage products.
Nick
Gardner, director of Chase de Vere Mortgage Management,
said that "A few weeks ago the City was factoring
in two more rate rises this year, but now the market
is only expecting one." This sentiment was echoed
by several other lenders.
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