Sunday, May 6, 2007
Strange article from the Torygraph
On Thursday the Bank of England is almost certain to raise interest rates to 5.5%. I don't agree. The Bank has just published data showing mortgage approvals at their lowest level for a year. The rate rises already implemented are now kicking in.In my view, it is the world's currency markets, more than anything else, that will determine the future path of British interest rates. If America slumps, and US rates are cut, the dollar will fall against the pound, and a strong pound will lower British inflation.If the dollar refuses to yield, and this "currency effect" doesn't happen, inflation in Britain may remain stubbornly high. Rates could then head towards 6 per cent.