Next rate rise predicted for May

City analysts were last night putting their money on the next interest rate rise on 5 May, after the local elections in England and Wales will be out of the way.

The economic betting followed no move in the rates after yesterday's monthly meeting between the Bank of England Governor, Eddie George, and the Chancellor, Kenneth Clarke.

The Chancellor was doubtless able to muster an economic as well as a political case for keeping rates on hold. The latest cyclical indicators published by the Central Statistical Office point to a slowdown of the economy in 1995. Indeed, the two indices that lead the economic cycle suggest that the upswing from the low point of early 1992 may already be approaching its peak - a revelation hardly designed to restore the notorious feelgood factor, still less morale on the Tory back benches.

While Mr Clarke had claimed on the BBC Today programme that "we have two more years of strong industrial recovery", the Treasury's regular monthly report for the meeting used more sober language. The most recent monthly indicators were "consistent with a modest slowdown in growth to a more sustainable rate". Manufacturing output and retail sales had been flat over the latest three-month periods and the housing market remained in the doldrums.

The Confederation of British Industry had some encouraging news for the Chancellor when it revealed a drop in manufacturing pay awards in the three months ending February. Compared with the period ending January, settlements reported to its databank had fallen from 3.0 per cent to 2.9 per cent, well down from their recent peak in November.

The trouble for the Government is that the recent plunge in the pound threatens to undo the attempts made to keep inflation at bay.

Since the Governor last put up interest rates in early February, the trade-weighted index has fallen by over 4 per cent. On conventional calculations, this more than offsets the disinflationary effect of that last rise, as higher import prices feed through to the economy. One indicator of that pressure was this week's purchasing managers' survey for March, which the Treasury accepted in its report "continues to suggest input prices are growing strongly".

It is because of the potential inflationary impact of continued sterling weakness that most City analysts still expect interest rates to move up before long. Since the pound has suffered mainly as a side-effect of the dollar's weakness, the Government must be hoping for a recovery in the dollar. But concerted intervention by the Federal Reserve, Bundesbank and Bank of Japan to buy dollars propped up the US currency only temporarily yesterday.

And any hope that the Fed would help out with a rise in interest rates was extinguished by further evidence of weaker growth in the US, suggesting there will be no rise in interest rates until at least the 23 May meeting of the Fed's policy committee. The leading indicator of the economy fell 0.2 per cent, the biggest drop since mid-1993. And wholesalers' stocks rose 1.2 per cent, the eighth monthly rise in succession, due to weaker demand.

The dollar managed to gain a pfennig against the mark after several rounds of intervention. Dealers put total intervention at about $2bn - in a market whose turnover is estimated at $1,000bn a day. However, the dollar had lost a pfennig earlier in the day and retreated again later. By noon in New York, it was stuck at DM1.3850 and Yen86.50, near its previous closing values.

The slice of Prince Charles and Princess Diana's wedding cake and the original box from 29 July 1981
newsPiece of Charles and Diana's wedding cake sold at auction in US
Arts and Entertainment
Gregg Wallace in Summer's Supermarket Secrets
tv All of this year's 15 contestants have now been named
Arts and Entertainment
Inside the gallery at Frederick Bremer School in Walthamstow
tvSimon Usborne goes behind the scenes to watch the latest series
Life and Style
A picture taken on January 12, 2011 shows sex shops at the Paris district of Pigalle.
newsThe industry's trade body issued the moratorium on Friday
Winchester College Football (universally known as Winkies) is designed to make athletic skill all but irrelevant
Life...arcane public school games explained
Arts and Entertainment
Could we see Iain back in the Bake Off tent next week?
tv Contestant teased Newsnight viewers on potential reappearance
Life and Style
Silvia says of her famous creation: 'I never stopped wearing it. Because I like to wear things when they are off the radar'
fashionThe fashion house celebrated fifteen years of the punchy pouch with a weighty tome
i100(and it's got nothing to do with the Great British Bake Off)
Angelina Jolie with her father Jon Voight
peopleAsked whether he was upset not to be invited, he responded by saying he was busy with the Emmy Awards
Bill Kerr has died aged 92
peopleBill Kerr appeared in Hancock’s Half Hour and later worked alongside Spike Milligan and Peter Sellers
news It's not just the world that's a mess at the moment...
footballPremiership preview: All the talking points ahead of this weekend's matches
Keira Knightley poses topless for a special September The Photographer's issue of Interview Magazine, out now
ebooksAn evocation of the conflict through the eyes of those who lived through it
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
Mario Balotelli pictured in his Liverpool shirt for the first time
Life and Style
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Data Scientist (SQL,Data mining, data modelling, PHD, AI)

£50000 - £80000 per annum + benefits+bonus+package: Harrington Starr: Data Sci...

SAS Business Analyst - Credit Risk - Retail Banking

£450 - £500 per day: Orgtel: SAS Business Analyst, London, Banking, Credit Ris...

Project Manager - Pensions

£32000 - £38000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...

KYC Analyst, Birmingham - £200-£250 p/d

£200 - £250 per day + competitive: Orgtel: KYC Analyst, Key Banking Client, Bi...

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone