The Bank's interest rate dilemma

Article Abstract:

The Monetary Policy Committee of the Bank of England's has to decide on whether to change UK interest rates in Jul 1998. UK retail price inflation rose to 3.2% in May 1998, and private sector wages increased by 6.1% in Apr 1998, while the inflation target is 2.5%. There is a debate as to whether unemployment has dropped to an unsustainable level where it will push up inflation, but there is no certainty as to the natural level of unemployment in the UK. Retail prices of some items rose in May 1998, but sales dropped, so consumers may resist inflation.

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Rate warning

Article Abstract:

United Kingdom interest rates could increase to 7.5% in 1998, according to Goldman Sachs. UK economic growth looks set to slow in 1998, but not enough to reduce inflation to a target rateof 2.5%. Growth in gross domestic product (GDP) has to drop to some 1.5% in 1998 for inflation to remain stable, and the Bank of England forecasts GDP growth of 2.5%. Higher growth is possible without leading to inflationary pressure if the efficiency of the economy has improved, but there is no clear evidence that the economy has become more efficient.

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Markets jump the gun on base rates

Article Abstract:

Trends in British interest rates are examined in detail, including likely influences from inflation.

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