UK Interest Rates - The next rise to 5.75% to occur in...

By: Nadeem_Walayat

The Banks minutes and inflation report, and recent comments by the bank governer Mervyn King, all point towards to a further rise to 5.75%. The question is will interest rates rise this week ?

The Bank of England to date has only once raised interest rates in consecutive months, this therefore suggests a rise in June to be extremely unlikely. However the 3 month inter bank rate trading at 5.80% continues to trend higher, implying building pressures for a further rise in the near future, which points to a rise sooner than the target date of Sept 07.

The Base Rate trend continues to lag UK Inflation which nudged above 16 year highs. So even the recent dip from 4.8% to 4.5% should not be taken as a sign of lessening interest rate pressures as the spread between Base rates and Inflation remains at historic lows, which suggests that we could even see a 0.5% rise in interest rates.

The bank's May inflation report confirmed a rate rise to 5.75% to bring CPI inflation back to its 2% target in two years. Therefore the bank is expected to delay inline with previous decisions to factor in more data before taking the decision to raise interest rates. This suggests that the next rise is most likely to occur in August 2007.

Remember to check back for our new long-term UK interest rate forecast to cover UK rates for the next 2 years.

Notes

	Inflation report confirms further rise in UK Interest rates to 5.75% - May 07
	UK strong house price growth signals further rises in interest rates - March 07
	UK Interest Rate forecast for 2007 - Bank of England to do battle with inflation - Dec 06
	UK Interest Rates could rise to 5.75% in 2007 - Nov 06
	Interest Rates Correction is Over - March 2006
	UK Long-term Interest Rates Trend is still UP ! - Nov 2005

By Nadeem Walayat
(c) MarketOracle.co.uk 2007

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