UK economists split on interest rate rise
British economists were split today on whether millions of households will face higher borrowing costs this week.
The Bank of England will announce on Thursday whether it has dispensed with its gradual approach to interest rates by raising them for a second consecutive month, to 4.5%.
Some commentators said a rise was needed immediately to cool rampant house price growth and consumer borrowing.
Data released by UK mortgage lenders since the meeting of the Bank’s monetary policy committee (MPC) at the beginning of May have suggested no slowdown in the housing market.
But other economists said the MPC may wait until July amid fears that a rate hike could snuff out any recovery in the manufacturing sector.
The pound recovered much of its strength against the US dollar in May and this has put UK exporters under renewed pressure.
HSBC economist John Butler said the decision was a tough call and there seemed “little reason to delay” raising rates.
But supporters of a rise in the cost of borrowing included Investec economist David Page who noted the more hawkish stance of the MPC towards inflation at its previous meeting.
Minutes of that meeting revealed the MPC considered lifting rates by half a percentage point.
The decision by oil cartel Opec to hike production quotas will help bring fuel prices down and ease inflationary pressures, but not by enough to delay a rate hike.
