Tuesday, February 06, 2007
'Strong chance' of UK rates rise
There is a "strong possibility" that interest rates in the UK will rise in February, according to a report. Research by BDO Stoy Hayward, which unites the UK's main business surveys, shows that inflation expectations have "shot to a two-year high". Despite economic growth being tipped to increase by 3% in the first six months of 2007, the report also showed a less positive outlook by firms. "Worries over further interest rate rises are starting to dent business confidence", said BDO.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6329395.stm
In addition to the effect that a rise in interest rates would have (if the central bank did take this course of action later this month) in raising the cost of borrowing and hence depressing both investment and consumption, the anticipation of an interest rate hike in itself has negative consequences. A fall in "business confidence" can in itself reduce investment irrespective of the interest rate.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. The effects of changes in business confidence as proxied by autonomous investment are examined in chapters 4 and 10 (at principles and intermediate level, respectively). Find out how to get LiveEcon at www.liveecon.com Download this blog as a Blogcast via the website.
There is a "strong possibility" that interest rates in the UK will rise in February, according to a report. Research by BDO Stoy Hayward, which unites the UK's main business surveys, shows that inflation expectations have "shot to a two-year high". Despite economic growth being tipped to increase by 3% in the first six months of 2007, the report also showed a less positive outlook by firms. "Worries over further interest rate rises are starting to dent business confidence", said BDO.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6329395.stm
In addition to the effect that a rise in interest rates would have (if the central bank did take this course of action later this month) in raising the cost of borrowing and hence depressing both investment and consumption, the anticipation of an interest rate hike in itself has negative consequences. A fall in "business confidence" can in itself reduce investment irrespective of the interest rate.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. The effects of changes in business confidence as proxied by autonomous investment are examined in chapters 4 and 10 (at principles and intermediate level, respectively). Find out how to get LiveEcon at www.liveecon.com Download this blog as a Blogcast via the website.
# posted by Sam @ 17:22 
