Increase in interest rates 'could be catastrophic'

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Increase in interest rates 'could be catastrophic'

It would not be a good idea for the base interest rate in the UK to be raised due to the potential impact it would have on the country's economy, a sector commentator has asserted.

Editor of Investment and Business News Michael Baxter made his remarks in response to a report by the Organisation for Economic Cooperation and Development, which suggested this rate could be raised to 3.5 per cent by the end of 2011.

It cited the projected increase in inflation as the reason.

Mr Baxter described this recommendation as worrying, suggesting the document as "almost contradictory" and "a bit funny".

In his view, it could be a disaster if the base interest rate were put up this much within the next 18 months, as there is so much uncertainty in the current economic climate.

He added: "Apparently we had a crisis earlier this month, which could have been as serious as the Lehman Brothers going bust. This goes to prove the economy globally is still very vulnerable."

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