Monday 13th August 2007
The Bank of England seems set to raise interest rates to six per cent, according to its quarterly inflation report.
Predictions of upcoming values for inflation on the consumer price index (CPI) are higher than in the corresponding May report, the Bank states.
As such, further efforts may be required in order to bring inflation back down to its two per cent target over the next two years.
"In the central projection, inflation falls back during the second half of this year and then settles around the two per cent target," the report explains.
However, the Bank adds that only ten of the next 100 CPI inflation reports are expected to fall within the central range.
By this point in 2009, the projection widens to allow for inflation of anywhere from about 0.9 per cent to 3.3 per cent.
Meanwhile, the report suggests that the Banks monetary policy committee (MPC) - which sets the base rate of interest - remains divided on whether a future rise is a good idea.
The June and July decisions were split 5:4 and 6:3 respectively among the nine members of the MPC, while exact voting figures for the August decision have yet to be published.
"There is a range of views among the committee on both the central projection and the balance of risks," the inflation report notes.
Chief UK and European economist at Global Insight Howard Archer comments: "Interest rates would need to rise by a further 25 basis points to six per cent before the end of the year if CPI is to be limited to its two per cent target rate on a two-year horizon."
But he adds: "The bank is in no immediate hurry to raise interest rates again given the current major uncertainties surrounding both the inflation and growth outlooks."
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