Interest rate rise expected

UK interest rates are widely expected to go up to 5.75% this week, in the Bank of England’s latest step to combat inflation.

The Bank of England’s Monetary Policy Committee is due to meet on Thursday. Interest rates where held at 5.5% at the committee’s last meeting, although the minutes showed that four of the nine MPC members wanted an increase in rates. The four included Bank of England governor Mervyn King.

Inflation currently stands at 2.5%. The government target is 2%.

Last month Mervyn King warned that further interest rate rises would be needed before the end of the year, unless consumers and businesses slowed spending.

He said: "More persistent inflationary pressures have picked up."

Although an interest rate rise is expected, business leaders have urged the Bank of England not to increase rates this week.

Steve Bradley, chief economist of business group EEF, said: "We have supported the Bank all the way through the current cycle of increases.

"However, we now believe that there are indications that the medicine applied so far is beginning to take effect and the case for another rise is not made."

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