Further interest rate rises ’should be expected’
The governor of the Bank of England has warned that further interest rate rises should be expected, which may concern those worried about rising levels of debt.
According to the Bank’s governor Mervyn King, it should be expected that interest rates will increase to six per cent before the end of 2007 unless there is a reduction in spending by businesses and consumers.
Mr King also noted that there would need to be indications that inflationary pressures are decreasing, news that comes at a time when new data from the Office for National Statistics shows the UK’s rate of inflation to be 0.3 per cent lower at 2.5 per cent in May.
“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 indicators remain elevated, the [monetary policy committee] may need to take further action,” he added.
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