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UK growth and inflation add to calls for rate hike
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UK growth and inflation add to calls for rate hike
The UK economy is set for steady expansion this year and next and there is almost a one-in-three chance of an August interest rate hike as both inflation and growth creep higher, a Reuters poll shows. The median forecast of 25 economists in the quarterly survey, carried out July 19-21, showed growth at 2.4 percent this year and 2.3 percent in 2007, slightly higher than a larger sample poll last month which showed 2006 growth at 2.3 percent.
The UK economy expanded at a quarterly rate of 0.8 percent in the second quarter, data last week showed, its fastest rate in two years and coming in higher than consensus forecasts of a rise of 0.7 percent.
Some economists now see rates rising sooner than previously predicted. The median of 14 forecasts showed a 25-30 percent chance that the Bank of England?s Monetary Policy Committee would hike rates at its next meeting on August 3.
Median forecasts showed rates on hold at 4.5 percent throughout this year and next, but a significant minority ? nine of 22 ? saw rates rising to 4.75 percent by the end of the year while 13 saw rates steady at 4.5 percent.
Some economists said minutes from the Bank of England?s last meeting, released last week and showing a vote of 7-0 in favour of keeping rates on hold in July, had now been overtaken in importance by both GDP and inflation.
Both came in ahead of expectations and have backed arguments that a further rate rise sooner rather than later is warranted.
A record increase in household utility bills pushed the consumer price index (CPI) to an annual rate of 2.5 percent in June ? a nine-month high and further above the bank?s 2.0 percent target.
Mid-point forecasts showed inflation averaging 2.2 percent this year and 2.0 percent in 2007.
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