Interest rates set to rise again
Interest rates look almost certain to rise again, after four members of the Bank of England's Monetary Policy Committee (MPC) voted for a rise in June.
Those calling for interest rates to rise to 5.75 per cent this month were out-voted 5-4 by those calling for them to stay static.
In the last year the MPC has raised interest rates four times in an attempt to bring inflation under control.
Inflation has been above the government's target since May last year, reaching its highest level since the MPC took charge of interest rates in March.
And this high inflation led Bank governor Mervyn King, John Gieve, Tim Besley and Andrew Sentance to vote for a rise in rates this month.
It is only the second time since the Bank gained interest rate setting powers that the governor has voted against the majority of the committee - the last time occurring in August 2005, when Mr King voted for an interest hold when the majority of the committee voted for a cut.
But such a big split means economists are predicting rates will rise again soon.
"A further 0.25 percentage point interest rate hike in July now looks highly likely, given that four MPC members were in favour of raising interest rates in June," said Howard Archer, chief UK economist at the Global Insight consultancy.
"Furthermore, the minutes give the impression that for some of the other MPC members, it was a question of when to raise interest rates again rather than if."
There were also questions of how high interest rates could rise.
"There is clearly a very real risk that interest rates will reach six per cent before the end of the year," Mr Archer predicted.
"Much will depend on how well the economy holds up over the coming months, as this will significantly influence the extent to which firms can raise prices and make them stick."
Ian Kernohan, economist at RLAM, was less convinced rates would rise that high.
"How far are the MPC prepared to go, bearing in mind the lags involved between raising rates and their effect on the economy?" he asked.
"I expect one more rise will be enough and the risks to growth and interest rates next year remain to the downside."
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