Interest rates rise could risk unnecessary weakness

With interest rates expected to hit 5.5% tomorrow, Simon Ward, chief economist at New Star, is warni...

With interest rates expected to hit 5.5% tomorrow, Simon Ward, chief economist at New Star, is warning that a move beyond 5.5% could risk unnecessary economic weakness in 2008. “The bank needs to beware of overkill. The three earlier hikes coupled with a 5% rise in the exchange rate over the last year have tightened monetary conditions significantly. There are signs that growth is beginning to slow, while inflation news is set to improve.” Rates have been left unchanged for two months. If increased by quarter of a percentage point as expected, the UK's base rate will reach its highest...