Thursday, 26 March, 1998

By FWi staff

THE Bank of England is under mounting pressure to raise interest rates when its Monetary Policy Committee next meets in early April.

Gavyn Davies, chief economist at Goldman Sachs, told the Commons Treasury Select Committee this week that the Bank has created a “significant risk” to the economy by failing to raise interest rates further.

Mr Daviess comments were backed by the monetarist economist, Professor Tim Congdon, who told MPs that he had called for an immediate 1% rise in interest rates early last year.

Increased consumer demand over recent months has seen inflation rise above the 2.5% target set by Chancellor Gordon Brown. Many City analysts now believe that the pressure to reduce inflation could lead to an interest rate rise of at least 0.25% to 7.50% following the MPC meeting on April 8-9.

Bank of England gurus are evenly split on whether to raise interest rates. The Banks Governor, Eddie George, used his casting vote at the MPCs February meeting to ensure interest rates were left unchanged at 7.25%. He is believed to have done the same at the Banks last meeting earlier this month.