UK Interest Rates To Rise?

UK Interest Rates To Rise?

UK Interest Rates To Rise?

Numerous business groups are speaking out against a rise in British interest rates. It is argued by BDO that strengthening the pound will have a negative impact on manufacturing as British export prices will be less competitive. The knock-on effect could kill expansion in manufacturing sectors, which is currently positive.The British Chambers of Commerce (BCC) and Price Waterhouse Cooper are also battling the Bank of England, urging them not to raise interest rates too early as it will risk economic growth at an already tenuous time.Despite popular demand, economists at Nichols and Meyer Capital Partners are predicting that the Bank of England will raise interest rates due to inflationary demands. Inflation is currently 4% with the target set at 2%. Three interest rate hikes are predicted by the end of the year, with additional raises in 2012. It is, however, not easy to forecast the rise in interest rates as it is dependent on the economy's functionality in the coming months. Interest rates were continually put back throughout 2009 and 2010 whist the economy was dwindling. The more positive economic climate of the summer had experts tipping the interest rate rise, only to find it was delayed once more with a poor final quarter at the end of 2010.BDO have commented that "Tackling inflation is clearly at the top of the Monetary Policy Committee's agenda, but it could be a policy error to raise interest rates as early as April or May."It became highly suspected a rise in interest rates was on the cards late in 2010. More, highly awaited information will be detailed after the next MPC meeting in April. Fiscal tightening will take place in April and will be factored into any decisions made by the MPC, as will wage increases and oil prices. Though it is thought any vote on a rise in interest rates will be tight. Interest rates are currently set to 0.5%, a historic low, where they have been for two years. With the end of the recession not in sight and unemployment rates still high, some believe it is unlikely interest rates will be raised for some time.

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