Experts play down rate hike fears

Will rates go up again this month?

Economists are playing down what many homeowners and businesses fear - a third consecutive interest rate rise.

Most reckon that the Bank of England will pause for breath on Thursday, to see if recent increases to 4.5% have helped to dampen consumer spending

The Bank of England's Monetary Policy Committee (MPC) could delay any further rate rises until the publication of its inflation report in August.

However, strong economic data from the last two weeks could tip the balance.

Retail sales were close to two-year highs in June thanks to the warm weather and the Euro 2004 football championships.

Meanwhile, the UK economy grew at a faster between January and March, according to the Office of National Statistics.

Growth in the first quarter was 0.7% - a rise of 0.1% on earlier estimates.

House prices cool

However, signs that the housing market may be cooling down could put the brakes on an immediate rate rise.

HSBC economist John Butler said: "The language of the MPC had clearly toughened but we expect the next move will come in August."

The MPC noted "tentative signs" of slower activity in the housing market, which was backed by the latest surveys from the Nationwide and Halifax which showed smaller increases in house prices last month.

And comments from housebuilders such as Wilson Bowden also tell of a levelling out in the property market.

"Collectively these pieces of evidence do suggest a new mood of caution in the housing market and argue strongly in favour of the MPC avoiding a gung ho approach to interest rates," said Investec economist Philip Shaw.

'Finely balanced'

The decision to raise UK interest rates to 4.5% last month was approved unanimously by the Bank of England's rate-setting body, the last minutes showed.

The quarter percentage point rise was the fourth announced by the Monetary Policy Committee (MPC) since November.

However, unlike the MPC's May meeting, there was no discussion of a half point rise - with one member saying the decision was "finely balanced".

Experts now predict that the Bank will delay a further rate rise until August and that rates will peak at 5.25% early next year.