More UK interest rates, more fuel for the fire

It seems that the vultures are beginning to circle around the Bank of England. As we reported in our previous article, Institute of Directors have outlined that their own report points to increases in bank rates needed. Adding more fuel to the fire comes a report from BDO Stoy Hayward outlined in BN that precicts an even further increase in inflation.

With the Bank of England set to meet on Thursday and probably vote for an increase in the rate of interest to 5 percent, attention is turning to what will happen next, with a growing consensus arguing at least one more rise will follow, but there could be more. And now BDO Stoy Hayward has added ammunition to the hawks nest, with the revelation that according to its latest business trends report, inflation is likely to be round 2.5 percent in the first quarter of next year. That’s zero point one percentage points up on the level we experienced in September, which was seen as too high. Furthermore, the projection was made on the assumption rates will rise on Thursday.

Douglas McWilliams, head of the Centre for Economics and Business Research said: "Even if the Bank raises rates in November, the inflation outlook is likely to prompt another rate hike early next year.’ 

Over the weekend the press in the UK has started to pick up sentiment that further increases will be required to cure both the projected rate of inflation and also to dampen the dangerous state of the UK housing market. Without the correct balance the bank could quite easily set the path for the UK to go into resession. 

As before we are pushing for the bank to send a ‘solid’ message that spending needs to be curbed. There is also concern that the indebtedness of consumers is rising with reports that mortgage reposessions are at a new high.