Rate of inflation to be held?

It appears probable that the Bank of England’s monetary policy committee (MPC) will decide to leave interest rates on hold following its meeting on January 12th.

However, the rates are likely to be raised to 5.25 per cent next month, meaning more bad news for mortgage holders.

The raise has been predicted by economists for some time and it comes after the cost of borrowing was increased twice towards the end of 2006.

Inflation is currently at 2.7 per cent, the highest it has ever been under this Labour government, and policymakers are concerned about inflationary wage deals as a result of living costs.

“A rate hike this week is not out of the question but given we still know nothing about January wage settlements, I think the bank is more likely to wait,” Alan Castle, economist at Lehman Brothers, told Reuters.

A recent poll carried out by Reuters found that 49 out of 50 economists asked expected rates to remain on hold, while almost 50 per cent thought there would be a rise by March.

Tags: hold, alan castle, money, policymakers, quantitative easing, economist, bank