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Major Accountancy Firm Predicts U K Rates To Remain On Hold

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Bank worried about inflation Rates 'To Be Left On Hold'

Updated: 06:21, Monday July 03, 2006

The cost of borrowing will stay the same until the end of this year despite rising inflation, an accountancy firm has claimed.
BDO Stoy Hayward says inflation has continued to increase, driven by higher price expectations in the manufacturing sector.
It says this supports other evidence of strong growth in prices, with the Consumer Prices Index hitting 2.2% in May - above the Bank of England's 2% target.
But despite this threat, the group expects the Bank of England to keep rates on hold for the rest of the year, as it monitors the continued weakening of the dollar and uncertainty in world markets.
Many analysts have been predicting that the bank will raise rates in the near future.
However, BDO Stoy Haward partner Peter Hemington said: "There has been widespread speculation about whether interest rates will increase in July to combat rising inflation.
"But we predict that the MPC will adopt a 'wait and see' approach, not just this month, but for the rest of 2006.
"This will allow the committee to assess the full impact of recent fluctuations in the world financial markets on the UK economy and monitor any future falls in the value of the dollar

The UK (and EZ) need overvalued currencies like the proverbial hole in the head at a time when recovery is just beginning. Its hard enough competing with Asia as it is and with uncompetitive currencies things look bleak. Could this point to a revaluation of sterling through inaction on rates? Dangerous as a lower pound may increase inflation forcing Gordon to move the CPI goalposts or to add more goods that are declining in price to the basket.

Can't beat the market or the forces of equilibrium which is why you cannot devalue the world's largest economy's currency without consequences.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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