MPC likely to shun early rate increase

GROWING FEARS of a repeat of a 1980s-style boom have hardened views in the City that the Bank of England will raise interest rates before the year is out to nip inflation in the bud.

The Monetary Policy Committee (MPC) is almost certain to keep rates at 5 per cent after its monthly two-day meeting, which begins today. But more than half of economists polled yesterday said rates would rise in coming months; of 15 analysts polled, eight predicted a rise and seven forecast no change.

Only two months ago the debate was about the need for another cut. Since then growth has been revised up, unemployment has fallen further and house- price inflation has surged to almost 10 per cent. Recent surveys of manufacturing, services and construction have pointed to rises in input inflation after years of falling prices.

HSBC has pencilled in a rate rise of 100 basis points to 6 per cent by March 2000 - exactly in line with the money markets - with the first rise in November. Economist Adam Cole said: "The recovery is gathering pace. The case for the Bank raising rates this year is growing."

David Owen of Dresdner Kleinwort Benson said: "Further evidence ... that inflation is coming in above expectations could be sufficient grounds for a rate rise in October."

The retail sector today made a last-ditch plea to keep rates on hold, saying its latest survey showed that growth was "subdued". Growth in sales on the high street slowed for the second successive month in August, the British Retail Consortium (BRC) said.

Total sales rose by 3.7 per cent, down on July's 3.9 per cent and 4.5 per cent in June. Bridget Rosewell, the BRC's chief economic adviser, said the increase in volume had only been achieved through price cutting. "There is no justification for interest-rate rises and further cuts would be required to generate anything like a boom," she said.

Official figures today are expected to confirm the embryonic recovery in the manufacturing sector. Manufacturing input is forecast to rise by 0.3 per cent in July following June's 0.2 per cent fall, while industrial production should have expanded by 0.2 per cent, up on June's 0.1 per cent.

t The MPC's remit should be widened to include a goal of creating employment, the UK's largest manufacturing union said yesterday. A poll of 150 full- time AEEU negotiators found that 77 per cent believed the remit should be changed, while nine out of 10 called for the committee to be more representative of manufacturing.

The survey found overwhelming support for the decision to hand the power to set interest rates to the Bank of England. Sir Ken Jackson, AEEU general secretary, said: "The MPC is steering a steady course and it is making manufacturing more confident."

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Graduate Recruitment Resourcer

£20000 per annum + commission: SThree: Sthree have an exciting opportunity for...

Recruitment Genius: Telesales Executive - OTE £32,000+

£18000 - £32000 per annum: Recruitment Genius: A Telesales Executive is requir...

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Day In a Page

General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
How Tansy Davies turned 9/11 into her opera 'Between Worlds'

How a composer turned 9/11 into her opera 'Between Worlds'

Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

Italy vs England player ratings

Did Townsend's goal see him beat Kane and Rooney to top marks?
Danny Higginbotham: An underdog's tale of making the most of it

An underdog's tale of making the most of it

Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

Steve Bunce: Inside Boxing

Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat