City unsure about next base rate decision

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City unsure about next base rate decision

Fri 11th Mar 2005

The City of London is reportedly split over what interest rates will do this year.

According to the Times news paper Nearly half of all City economists believe that interest rates will rise again before the summer. Some are forecasting the rise next month, and many more in May.

Most experts believe the Bank of England will not oppose a rate rise before the general election, expected to take place on May 5th.

"We continue to expect one further quarter-point hike, but not before the next (Bank) Inflation Report in May," Ross Walker, of RBS Financial Markets, said.

The Bank of England's Monetary Policy Committee opted yesterday to maintain the cost of borrowing at 4.75 per cent for the seventh month in a row.

UK business leaders repeated their concerns over the possible effect of a further rate rise.

"Any increase in the coming months would choke off what appears to be a modest manufacturing recovery," Ian McCafferty, chief economic adviser to the CBI, said.

"Until the underlying strength of the economy is clearer, a rise in interest rates would be premature."

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