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Last Updated: Thursday, 5 July 2007, 08:16 GMT 09:16 UK
Bank expected to raise UK rates
Bank of England governor Mervyn King
Mervyn King has recently warned that inflation remains a concern
The Bank of England is expected to raise UK interest rates from 5.5% to 5.75% shortly, as it resumes its efforts to reduce inflation.

Most economists predict a rise after Bank governor Mervyn King said recently that inflation remained a concern.

They also point to the fact that while rates were kept level in June, four of the nine members of the Bank's Monetary Policy Committee voted for a rise.

However, 20% of economists in a Reuters poll predicted no change in rates.

HAVE YOUR SAY
There are many of us who lived through much higher interest rate periods than this
Denis, Leeds

These economists point out that while the most recent figures showed that inflation remained above the government's 2% target, it did actually slow to 2.5% in May from 2.8% in April.

Debt worries

The Bank will announce its latest rate decision at midday.

A rise in interest rates from 5.5% to 5.75% would put an extra 16 a month on an average 100,000 repayment mortgage, but it could be good news for savers, who should receive more for their investments.

The Bank has increased rates four times since last August and charities have expressed concern that another increase could leave many borrowers facing difficulties.

"We're seeing more and more people coming in for help with mortgage or secured loan arrears," said Sue Edwards from Citizens Advice.

"People are really stretching themselves to the limit to buy a house and take on a mortgage, so a small increase in interest rates could just tip them over the edge," she told the BBC.

Mixed housing signals

There is some dispute about the strength of the housing market.

UK interest rate graph

While the Halifax revealed on Wednesday that UK house prices rose 0.4% in June, Land Registry figures showed that the price of flats, as opposed to houses, in most parts of the England and Wales were now falling slightly.

Philip Shaw, chief economist at Investec, said that an increase to 5.75% at this month's meeting was definitely the most likely outcome.

"We have long argued that the committee would be unlikely to wait until the next Inflation Report in August to tighten again," he said.

"Does this view look correct? We very much think that it does."

However, Howard Archer, chief UK economist at Global Insight, said it remained "far from certain" that rates would go up in July.




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