UK interest rates may have to rise IMF

By FWi staff

THE Bank of England may be forced to raise interest rates if the UK is to meet its inflation target of 2.5%. That is the stark news from the latest World Economic Outlook report, published today by the International Monetary Fund.

The IMF report forecasts that inflation will hit 2.9% by the end of this year. The prediction lends credence to Chancellor Gordon Browns budget statement that inflation could peak at 3% before falling back to 2.5% during 1999.

The twice-yearly report warns that “striking the right balance for monetary policy in these circumstances is a difficult challenge.” But unless domestic consumer demand falls soon, interest rates may have to rise, it concludes.

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