Monday, October 2, 2006
Interest rate rise could happen on Thursday
A survey published by the Chartered Institute of Purchasing and Supply and the Royal Bank of Scotland showed its index of manufacturing activity at 54.4 in September. This was above the downwardly revised 53 for August and means the sector has now managed 14 consecutive months of growth. Sterling jumped on the news as traders reckoned the stronger-than-expected numbers provided further evidence that the economy was enjoying a period of solid growth and that this would increase the likelihood of the Bank of England raising the cost of borrowing to cool demand in order to contain inflation. Most analysts still expect a quarter percentage point rate hike in November, to 5 per cent, but have hedged their views in recent days, suggesting the Bank could justify moving when it meets this week against a background of over-target inflation and buoyant growth.