The Governor of the Bank of England, Mervyn King, believes that the base rate will not raise much higher as inflation has peaked and the Bank of England now believes it to be under control. In a recent speech at the Birmingham Chamber of Commerce Mr King said that the committee thought that inflation was likely to fall back in the second half of this year. The base rate was raised in January, as experts believe a delay in the rise of the base rate would mean a higher increase.
It has been commented that we should not expect any further surprises from the Bank of England, as they have suggested that their monetary policy is ‘boring’.
Our view
We still see much margin in the economy for one further increase. This may not be so, but if the economy does not slow down, expect a rise in April.