MPC decides against further rate surprises

Interest rates will remain at 4.75 per cent for at least another month, the Bank of England’s Monetary Policy Committee (lowercase ñ DN style) (MPC) has announced.

Following the surprise quarter-point increase in interest rates last month the decision was widely tipped, with all 103 economists in a Reuters poll predicting no change.

So far, any affect of the rise on the housing market has been overshadowed by solid demand, which continues to outstrip supply by more than two to one.

Most economists expect the rise to be followed by a further quarter-point increase towards the end of the year, as the MPC moves to head off continued inflation, however.

“There is now a high probability that the MPC will increase base rate by 0.25 per cent in October or November,” Bristol & West said.

The MPC has also warned that it expects inflation to continue to rise and said that it had taken action sooner than expected in order to minimise the increases required later.

Any further increases would be likely to have a more deeply-felt affect on the best mortgage rates available and on the wider housing market.

© Adfero Ltd

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