18 June 2004, 12:03  U.K. Consumers Expect Higher Rates in Next 12 Months, Survey for BOE Says

U.K. consumers last month expected interest rates to rise over the coming year, an NOP survey for the Bank of England showed, as policy makers signal borrowing costs are likely to go higher to contain inflation. The balance of those expecting higher rates less those predicting a drop was 69 percent, the poll of 1,974 people showed, up from 66 percent three months earlier. Shop prices are seen rising a median 2.5 percent over the next 12 months, more than February's 2.4 percent increase. The Bank of England has increased rates four times since November to 4.5 percent. Governor Mervyn King this week warned consumers that borrowing costs may rise further, saying ``anyone entering or moving within the housing market should consider carefully the possible future paths of both house prices and interest rates.''
Stephen Nickell, a member of the bank's Monetary Policy Committee, this week said inflation expectations among wage negotiators have been increasing, reaching between 2.7 percent and 2.8 percent as measured by the retail price index, excluding mortgage interest payments. That's ``in the long run absolutely consistent'' with the bank's inflation target, he added. The bank last month projected inflation, as measured against the consumer price index, would rise above its target of 2 percent over the coming two years, indicating it anticipated raising interest rates. ///www.bloomberg.com

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