MercoPress. South Atlantic News Agency

Bank of England hits of new interest rates rise

Interest rates will need to be increased

The Bank of England has hinted that it is likely that interest rates will need to be increased once more to keep inflation in check, although analysts do not expect any rise to be imminent.
The Bank's latest inflation report forecasts that consumer price inflation would continue to exceed the 2% target if rates stayed at 5.25%.

The Bank, which left interest rates stable earlier this month, also said it predicted stronger growth for the year. The report comes a day after official data showed Britain's inflation rate slowed more than expected in January, to reach 2.7%, after hitting an 11-year high in the previous month. But the bank said the 2.7% figure "does not mean that we can ignore concerns about inflation ahead". "The Committee will look through the short-run volatility to the outlook in the medium term, and it remains ready to take whatever action might be necessary." The Central Bank stressed that "much uncertainty about the path for inflation, in both the near and medium term" remained. Economic growth is tipped to peak above 3% around mid-2007, but will later fall to some 2.8% because of lower spending by the government as well as consumers, the report said. While the Bank suggested a rate rise was likely, figures released earlier on Wednesday showed average earnings had risen less than forecast in the last three months of 2006, which could calm inflation fears.