Further rate hikes 'not necessary'

The Bank of England yesterday increased the base interest rate to 5.75 per cent, a move that many holders of bad credit mortgages would have been dreading, and there are forecasts of another rise before the year is out.

According to Scottish Widows Investment Partnership (SWIP), however, another increase in the base rate is not necessary.

The company expressed its view that inflation is set to fall to two per cent over the next few months and stay level throughout 2008.

SWIP agreed that the UK economy has been buoyant this year, with growth of 2.9 per cent likely in 2007, but argued that this is also likely to fall back to around 2.3 per cent next year.

"In our view an increase in interest rates beyond 5.75 per cent is unnecessary given the prospect that the economy will soon start to slow and companies will find it harder to make price increases stick," the firm said.

"However there is a clear risk that an impatient monetary policy committee may push rates up to six per cent or beyond over the next few months."

Related Articles