Rate Pressure on Increase

Feb. 23, 2011 - PRLog -- Pressure within the Bank of England appears to be mounting Martin Weale, a member Monetary Policy Committee (MPC) has indicated that interest rates must now move in order to curb inflation and prevent sharper, faster and more damaging increases in the future. Weale joined the MPC hawk Andrew Sentence in January in calling for Bank base rate to be increased to 0.75%.

He has also indicated that raising rates would not necessarily result in falls in inflation happening fast, with the Bank of England forecasting that the consumer price index or CP could actually hit 5%. It has recently reached record highs of 4% in January.

The comments were made on BBC Radio 4, when Weale commented that raising base rate now would protect the country from a "squeeze" later. He added it would have the further advantage of reducing consumers' inflation expectations back towards the target of 2%. He feels that even with an immediate rise in rates he wouldn't expect that this alone in the short term would bring the inflation rate rapidly back to target.

Weale, joined the committee in 2010, has previously warned that the recent rise in inflation may affect people's expectations of future inflation. In doing so, he has insisted that this could actually make price rises self-perpetuating.

He said: "If businesses and people bargaining for wages expect high rates of inflation, then there's a risk that they may build those expectations into their current behaviour."
The minutes of the Monetray Committee’s latest meeting will be published tomorrow and the notes will reveal if a further members if the MPC have altered their vote in favour of raising base rates.

Many lenders have already priced in an expectation of future rate increases across their range of fixed rate mortgages and this has been seen across the board, particularly in the price now offered on a 5 year fixed rate mortgage rates

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