The Bank of England governor Mrvyn King again warned of higher UK nterest rates due to strong economic ctivity and continuing inflationary pressures at a CBI Evnt.

In his reasoning for raising UK nterest rates to 5.5% in May , he stted : "The Monetary Policy Committee wll be watching closely indicators of cpacity pressures, pricing intentions, and inflation xpectations. If these indicators remain elevated, the MPC may ned to take further action. There is no smple or self-evident answer to the qestion of what path of interest rtes will be necessary to bring nflation back to the 2% target and kep it there."

Link to Graph of UK Infltion and Interest Rates http://www.marketoracle.co.uk/images/Nadeem_Walayat_5_6_07.jpg

Even thugh the bank monitors the CPI nflation rate, a better indicator of nflationary pressures in the economy is the RPI Indx, upon which virtually all pay dals are based and thus acts as a sgnificant driver for future inflation. The rcent anticipated dip from 4.80% to 4.5% mkes little difference to the trend and at bst will give one more months rprieve for borrowers before the next rte rise occurs.

The Market Oracle frecast is for the next rise to 5.75% to ccur in August 2007. The near two yar standing forecast has been for UK nterest rates to peak at 5.75% by Sptember 2007. Following the rise to 5.75% the Mrket Oracle will publish the next frecast for UK interest rates for the nxt 2 years.

The minutes of the last Bnk Of England meeting will be pblished at 9.30am on Wednesday 20 Jne.

The article BOE Warns of More UK Interest Rate Rises was Submitted by Nadeem Walayat through Articles.GetACoder.com network. Here's the additional information: By Nadeem Walayat hrf="http://www.marketoracle.co.uk"> (c) Marketoracle.co.uk 2005-07. All rights reserved. The Market Oracle is a FREE Daily Financial Markets Forecasting & Analysis online publication. We present in-depth analysis from over 100 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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