Economic Update - Latest issue August’s interest rate rise

Roger Bootle's response to the August's MPC meeting

• This rise in interest rates to 4.75% is merely another staging post on the way to much higher interest rates.

• The increase is readily justified by recent data. Notably, the annual growth rate of GDP rose from 3.4% in Q1 to 3.7% in Q2 – well above the economy’s estimated trend rate of around 2.7%.

• Moreover, retail sales grew at a very robust monthly rate of 1.1% in June. And although the Bank of England’s new mortgage approvals series – which is a forward-looking indicator of activity in the housing market – fell from 124,000 in May to 114,000 in June, the Nationwide showed that house prices rose by 2.1% in July, taking the annual growth rate to a 14 month high of 20.3%.