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To: James Strauss who wrote (12861)	11/6/2003 10:57:31 AM
From: Bucky Katt	Read Replies (1) \| Respond to of 13094

Bank of England hikes interest rates on signs of global recovery ((They are located on Threadneedle Street)) LONDON : The Bank of England raised interest rates for the first time in almost four years, becoming the first of the world's four biggest central banks to tighten policy in response to a nascent global economic recovery. The Bank of England's nine-member monetary policy committee agreed to raise the main official lending rate by a quarter point to 3.75 percent, the central bank said in a statement. The European Central Bank announced shortly afterwards that it was leaving its main interest rate unchanged at 2.0 percent. The British hike, the first since February 2000, comes amid concerns about galloping consumer credit and a seemingly unstoppable rise in house prices. "The global economic recovery appears to be gathering momentum, though the pattern is uneven," the Bank of England said, explaining its decision. "After slowing at the start of the year, growth in the United Kingdom has picked up and credit growth remains strong." Business surveys suggested an economic recovery was becoming more broad-based, while neither household spending nor the housing market had slowed by as much as the committee expected, it added. "Underlying inflationary pressures are therefore likely to build gradually as demand strengthens and sterlings depreciation earlier this year feeds through," the statement said. The monetary tightening is the first by the one of the world's four major central banks since they began slashing interest rates in 2001 to try to breathe life into the sluggish global economy. The Bank of England started cutting rates in February 2001, taking them down by a total 2.5 percentage points from 6.0 percent. The US Federal Reserve last raised rates in May 2000, to 6.5 percent, before kicking off a round of concerted global cuts in January 2001 that brought its own main lending rate down to the current 45-year low of just 1.0 percent. The European Central Bank embarked on a series of rate cuts in May 2001, while the Bank of Japan is battling deflation with near-zero short term interest rates. But analysts said that the world's other three biggest central banks were unlikely to follow the Bank of England's lead any time soon. "The guidance we've had from the other major central banks like the US Fed and the ECB is that they're in no rush to hike interest rates," said HSBC economist John Butler. In Britain the prospect of higher borrowing costs has been spreading jitters among the country's many million property owners, the majority of whom have home loans linked to the Bank of England's official interest rate. House prices have been soaring in recent years, jumping by almost 17 percent over the year to October, figures from a leading home loan provider showed this week. So while the Bank of England is keen to see a slowdown in the housing market it must also tread a fine line to ensure that it does not trigger a house price crash as seen in the early 1990s which led to a wave of repossessions, analysts said. "We've just had a period in which we've had two speeds better than none, and that's been the Bank of England's philosophy," said Butler, referring to Britain's so-called "two-speed economy" with robust consumer spending and housing coupled with a weak manufacturing industry. "Now we're moving into one where we're going to have to cool the consumer down but the danger is, given how indebted the consumer is, attempts to cool it down could lead to quite a sharp correction," he warned. channelnewsasia.com