Further rise 'could come next week'
Interest rates could be raised to 5.75pc as soon as next week, economists warned after the most dovish member of the Bank of England's Monetary Policy Committee said inflation was likely to remain high for some time.
David Blanchflower, who until last month was a proponent of lower borrowing costs, said it still looked as if risks to inflation were on the upside. In a speech in London, he said: "It is difficult to interpret what the data are telling us about future inflationary pressures at present, although they do seem to point to an upside risk."
Prof Blanchflower's decision to support higher rates at the last MPC meeting surprised the market, and fuelled speculation that the Committee may lift borrowing costs as high as 6pc.
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However, he said businesses had so far resisted the temptation to raise salaries, describing wage inflation as "the dog that hasn't barked".
"My view is that wages are not going to increase much any time soon," he said.
He also explained his decision to change his stance and support a rate increase earlier this month thus: "[It] was to ensure that inflation expectations remain anchored, given rising food prices, recent further increases in oil prices, more robust world growth, and the March inflation outturn."
Source: telegraph.co.uk
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