12-06-2007
Further interest rate rises likely
Further interest rate rises should be expected, according to the governor of the Bank of England.
Mervyn King, the Bank's governor, suggested that markets could legitimately anticipate future interest rises up to six per cent before the end of the year.
"Obvious though the point may seem, it is unwise to borrow so much that the repayments are affordable only if interest rates remain at their initial levels," said Mr King in a talk to the Welsh Confederation of British Industry.
"If these [market] indicators remain elevated, the [monetary policy committee] may need to take further action," he added.
Mr King noted that an upward trajectory for interest rates would be likely in the absence of any spending reductions by both businesses and consumers, in addition to a continuation of the pressure caused by inflation.
In related news, the UK's rate of inflation decreased to 2.5 per cent in May, according to data released by the Office for National Statistics.
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