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Rates likely to be held again

Interest rates are likely to be held at 6% for the tenth consecutive month when the Bank of England Monetary Policy Committee meets later this week.

In a Reuters poll, 25 of 30 economists predicted that the rates will remain unchanged, largely because the economic environment has not seen anything significant to push the rates either up or down in the time since the last meeting of the committee.

Many economists are now predicting that the rates may go unchanged for a full year, especially with a Budget looming in March. This would represent a record length of time without a move one way or the other.

Some observers are expecting a quarter point rise at some point in the new year to ward off the inflationary pressures that may arise from high Christmas bonuses and loose spending policy in a 'give-away' pre-election Budget. The Governor of the Bank of England, Sir Eddie George last week refused to rule out further rate rises. He pointed out that the actions of the committee were independent of the political timetable and that excessive tax cuts might jeopardise the inflation target, the effect of which would inevitably be a rise in interest rates.

However, an equal number of analysts are predicting a fall in rates in the new year, and with the money markets also expecting a drop in the cost of borrowing, it should be an interesting few months for the committee in the early part of next year.