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Strategies & Market Trends : Cents and Sensibility - Kimberly and Friends' Consortium -- Ignore unavailable to you. Want to Upgrade?

To: Bouf who wrote (97242)	4/15/2000 11:49:00 AM
From: puborectalis	Read Replies (1) \| Respond to of 108040

The fear of recurrent inflation will force rates a lot higher here and overseas.......UK rates warning Bank of England Deputy Governor Mervyn King has hinted at the possibility of fresh interest rate rises. In a speech to the Plymouth Chamber of Commerce and Industry on Friday night, he warned that consumer demand could not be allowed to surge ahead unchecked for too long. Mr King also made clear the UK's trade deficit with the rest of the world could not go on widening indefinitely. His comments will heighten expectations among City analysts that the Bank's Monetary Policy Committee will seek to slow down the booming economy by raising rates by a quarter point next month. Strong pound There have been four rises since September and manufacturers, fearing another rise would push the pound up even further, have urged the Bank to leave the cost of borrowing unchanged. The strong pound is making it difficult for many UK companies - and especially those in the car industry - to compete against overseas rivals. But Mr King, who is seen by analysts as one of the Bank's "hawks", warned that delaying action now would simply mean even bigger rate rises later. He said: "The message for policy is that it is important not to let domestic demand grow too rapidly for too long. The longer the correction is left, the sharper the required adjustment will be. "The trade deficit cannot continue to widen indefinitely. Hence, at some point domestic demand will have to grow at below its sustainable trend level rather than significantly above as it has done for some time." Mr King told his audience: "Pre-emptive action to slow domestic demand growth to a more sustainable level is the key to avoiding a larger and more painful adjustment at a later date." The warning follows a report by the International Monetary Fund (IMF) on Wednesday which criticised the Chancellor's Budget. The IMF said interest rates would have to rise to counter the inflationary effects of Gordon Brown's œ4bn cash injection for public services. But Mr King made clear in a newspaper interview that the bank did not believe the Budget had a "major impact" on inflation. Search BBC News Online Advanced search options BBC ONE TV NEWS WORLD NEWS SUMMARY See also: 12 Apr 00 \| Business IMF attacks Brown's Budget 06 Apr 00 \| Business No change in UK rates 30 Mar 00 \| Business Growing business divide over euro 21 Mar 00 \| Business Inflation rises slightly 09 Mar 00 \| Business UK rates unchanged Internet links: International Monetary Fund The Treasury Plymouth Chamber of Commerce and Industry Bank of England The BBC is not responsible for the content of external internet sites Links to other Business stories are at the foot of the page.