The Telegraph, May 7, Roger Bootle
After the glories of the Coronation and the pleasures of the associated bank holiday, the interest rate-setters at the Bank of England return to work this week to face a difficult situation. To raise or not to raise, that is the question, or at least the first question. Assuming that the answer is to raise, the second question is “by how much”?
Although the Bank could decide to raise interest rates by 0.5 percentage points, the rise is more likely to be 0.25 points, taking the Bank Rate to 4.5pc. After all, the US Fed and the European Central Bank (ECB) both increased rates last week by 0.25 basis points. Whereas the Fed hinted that this rise might well be the last, the ECB’s President made it clear that there was more work to do.
But the urge to increase rates here isn’t just a case of “follow my leader”. At 10.1pc, UK inflation remains at much higher levels than almost anyone expected, including the Bank of England, and it is just over five times the 2pc target.
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