NEWS ITEM:
INTEREST rates will be in the spotlight this week amid expectations that the Bank of England will soon be hiking them for the second time this year.
The European Central Bank is set to raise its key interest rate from 3% to 3.25% on Thursday.
Amid conflicting data, including a downward revision to second-quarter gross domestic product and figures showing a record fall in credit-card lending in August, most analysts expect the Bank's monetary policy committee (MPC) to leave Bank rate on hold at 4.75% this week and to hike next month.
But the "shadow" MPC, which meets under the auspices of the Institute of Economic Affairs, says there is no reason for the Bank to delay. The results of its meeting, released today, show a 6-3 vote in favour of an immediate rise.
The shadow MPC voted for a hike ahead of the Bank's August meeting, when Bank rate was raised from 4.5% to 4.75%. It had favoured unchanged rates for every meeting before that since August last year, when it anticipated the cut in rates that month.
The six shadow MPC members who voted for a rise at the latest meeting cite strong growth in the M4 money-supply measure, rising house prices, consumer strength, above-target inflation and rising equity markets.
The latest business trends survey from accountants BDO Stoy Hayward suggests inflation expectations have risen in both the manufacturing and service sectors, strengthening the case for a rate hike.
"A rate rise is increasingly likely," said Peter Hemington, a BDO Stoy Hayward partner. "The majority of economic indicators this month have pointed to a rise in November and the business trends report suggests that the economy could absorb this."
