UK interest rates raised to 5.5pc

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Manufacturing News, Source : TheManufacturer.com
Published : 10 May 2007 12:21
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The Bank of England has raised interest rates by a quarter of a percentage point to 5.5 per cent.

The Bank of England has raised interest rates by a quarter of a percentage point to 5.5 per cent. The increase, widely expected by analysts, takes the cost of borrowing to its highest level since 2001.

Manufacturers’ organisation EEF said it accepted rates had to rise, but added that future increases could leave the UK's fragile manufacturing recovery at risk. According to figures released just hours before the bank's decision, UK manufacturing output rebounded slightly in March.

The British Chambers of Commerce (BCC) warned the Monetary Policy Committee (MPC) not to “overreact to transitory developments”. It said that the nine-member committee should take a wait-and-see approach on inflation, as the Bank itself expects the rate of price growth to slow later this year.

"There is a danger that concern over recent events would generate pressures on the MPC to go over the top and would result in damaging monetary overkill," the BCC added.

CBI chief economic adviser Ian McCafferty said: “While we fully accept the need for today’s rate rise, we see no reason for a further increase at present, as the impact of the one per cent increase in rates since last August should be sufficient to keep inflation pressures into 2008 under control.”