Article Abstract:
United Kingdom interest rates remained at 7.5% in Jul 1998, and government securities (gilts) rallied, indicating a belief that rates had peaked. It is still unclear, however, whether rates will be raised again. Some analysts see a possible rate rise if pound sterling drops in value, leading to inflationary risks. There is also concern that stagflation may become a problem, with high inflation and economic growth likely to slow. It is unclear whether consumer confidence has been undermined, or whether one-off factors such as the weather have affected consumer spending.
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Article Abstract:
UK interest rates were raised by 0.25% in early Nov 1996. This has led to uncertainty in UK financial markets and has led to increased speculation over what will occur in international markets. Consumption is seen as too high for inflation goals, and further rises may be needed to curb consumption. Interest rate levels also depend on fiscal policy and the strength of pound sterling. A higher value for the pound means there is less pressure to raise interest rates. The impact on share prices will depend on how far rates rise.
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Article Abstract:
United Kingdom interest rates could rise to 8% according to Richard Jeffrey from Charterhouse. Domestic demand has increased and could rise further due to windfall bonuses. Rising inflation could be reflected in higher wages and earnings. The proportion of windfall bonuses that is spent could be higher than forecast which means that consumption presents a particular inflationary threat. UK rates may be raised enough by the Monetary Policy Committee for a reduction in interest rates prior to year-end 1998.
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