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UK Interest Rates Forecasts and Predictions for Home and Property in the UK at 9th March 2007

UK Interest Rate: 5.25%

UK Interest Rates Forecast: Further 0.25% rise likely between March and May

Strong Growth Figures Lead To Inflationary Concerns

Britain's economy is stronger than expected, according to a number of recent reports. Both manufacturers and retailers are feeling buoyant and reporting strong sales and rising prices – good news for some, but not necessarily what the Bank of England wants to hear, as it tries to suppress inflation.

UK GDP grew by 0.8 per cent in Q4 2006, a little higher than expected, and bringing the annual rate of growth to 3.0 per cent – a strong result, and possibly enough to concern the more hawkish members of the Bank of England's Monetary Policy Committee.

Manufacturing Booming

The Chartered Institute of Purchasing & Supply's monthly survey reveals that manufacturers are taking advantage of strong demand and full order books to pass on their cost increases to their customers, with February seeing the biggest rise in the prices charged index (Factory Gate prices) since records began in November 1999.

Commenting on the data, Howard Archer, Chief Economist at Global Insight, suggested that "The manufacturing purchasing managers survey is likely to bolster belief among the more hawkish members of the Monetary Policy Committee that another interest rate hike is likely to be needed before long."

Retail Results Strong Too

Strong manufacturing figures were also complemented by positive results from retailers for February. According to the CBI, 19 per cent of retailers reported stronger sales in February than at the same time last year, with shoes and consumer electronics particularly strong.

Only A Matter Of Time?

These figures would seem to support the predictions of most economists, who believe that at least one further interest rate rise is inevitable. A recent Reuters survey of 64 economists found that an overwhelming majority believe the base rate will rise to 5.5 per cent in the next three months – with 43 predicting either April or May.





 

 

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