Base rate looks set to hold firm

The Bank of England's Monetary Policy Committee (MPC) is expected to maintain the current base rate in August.

According to the Observer-New Star barometer, the recent spate of rises, which has taken the base rate to a six-year high of 5.75 per cent in just 11 months, appears to be having an effect.

In light of this, it has been forecast that the MPC will not increase rates further and may refrain from doing so until 2008.

Despite the vast majority of analysts predicting that rates will hit six per cent before the year is out, the Observer-New Star barometer offers a glimmer of hope that this may not be the case.

This prediction, which is not solid but merely suggests that there is a chance of no further rate rises, is not one that Global Insight believes in.

The financial analyst anticipates that the base rate will reach six per cent in October and remain there for some time.

However, the firm also predicted that the MPC would not increase rates when it announces its decision on August 2nd.

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