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ARTICLE · 11 JUNE 2007

Economic Update – A Temporary Reprieve – Roger Bootle’s Response To June’s MPC Meeting

Deloitte
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Today’s decision by the MPC to leave interest rates on hold at 5.5% is only a temporary reprieve. There is a very good chance that interest rates will be raised to 5.75% next month, and failing that, in August. What’s more, I think that rates will eventually have to rise to 6%, or perhaps even higher, in order to secure the UK’s low inflation environment.

United KingdomStrategy
Roger Bootle, Economic Adviser, Deloitte
Roger Bootle, Economic Adviser, Deloitte
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  • Today’s decision by the MPC to leave interest rates on hold at 5.5% is only a temporary reprieve. There is a very good chance that interest rates will be raised to 5.75% next month, and failing that, in August. What’s more, I think that rates will eventually have to rise to 6%, or perhaps even higher, in order to secure the UK’s low inflation environment.
  • Admittedly, CPI inflation has now started to fall. The drop from 3.1% in March to 2.8% in April was the start of a move that could see inflation fall back below the 2% target by the end of the year. I think that May’s inflation figures, which the Committee will have seen ahead of today’s decision, will show a further fall in inflation to 2.6%.

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