Outlook: Interest rates

TWO MEMBERS of the Monetary Policy Committee, DeAnne Julius and Sushil Wadwhani, have recently publicised their opinion that interest rates do not yet need to rise. With two of today's nine votes committed in advance and other MPC members thought to be staying firmly in the wait-and-see camp, interest rates are likely to remain unchanged for at least another month.

It is a decision that will play to the gallery. Business organisations and unions will acclaim it. And Nationwide will cheekily be able to pretend the Bank of England has made a lower mortgage rate possible, having joined other lenders in not passing on to its customers the last official rate cut.

But will it be the right decision? In his memoirs, the former chancellor Nigel Lawson excuses himself from failing to stay the boom of the late 1980s by claiming that none of the official statistics indicated there was going to be one. With the benefit of hindsight, he says, he should have paid more attention to the housing market. It scarcely needs pointing out that once again housing is flashing amber.

While it is true, as manufacturers complain, that industry is still subdued, their lobbying misses the point. To raise interest rates by a small amount in the next few months would not be to punish northern industrialists for the economic profligacy of southern home-buyers, but rather to save them from worse pain later.