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Interest rate rise: the first of many to hit?
Page 9
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LAST WEEK'S interest rate rise 010.25% could signal the start of a chain of rate rises-and an increase in inflation, analysts believe.
While some firms CM spoke to this week were untroubled by the rise, the Bank of England, which sets interest rates, says that neither spending or the housing market have slowed by as much as it expected hence the increase. "Underlying inflationary pressures are therefore likely to build gradually as demand strengthens and sterling's depreciation earlier this year feeds through." its Monetary Policy Committee says in a statement.
Newspaper reports quote some City traders as believing the interest rate will hit 5% by next September, although other sources believe it won't be as high.
The current 0.25% hike will cause fewer problems than the recent increase in fuel tax, says Brian York, managing director of Bristol-based 011is Transport. " 1 t [the interest rate rise] won't have a significant effect on us.he says. "But if we continue to have interest rate rises, it will have a compounding effect and if it has an effect on the economy, it will have an effect on road transport."
Freight Transport Association ligures also show that an increase in interest rates will generally result in a reduction in investment.Although it believes a rise of 0.25% will have a negligible effect. any additional rises will begin to affect the industry.