Bank on brink of raising interest rate

ODDS are shortening on a surprise quarter-point interest rate rise from the Bank of England this week. And more rises are expected in the months ahead.

By Friday, money markets were betting on a rise to 4.25% this week and that rates will reach 4.75% by the end of the year, against previous expectations of 4.5%.

While City analysts were divided on whether the Bank will move in April or May, all were agreed that borrowing costs were heading upwards.

Recent figures have highlighted strong growth and company profits, frantic activity in the housing market and an improving export picture.

Only the strong performance of sterling on foreign exchanges could forestall a rise for fear of hitting exports.

Trevor Williams, economist at Lloyds TSB, said the Bank's monetary policy committee would probably raise rates sooner rather than later: 'You're going to do it, you know you're going to do it - so why wait?'

But John Butler, economist at HSBC, said: 'It is 50-50, but the Bank has shown itself keen to tie each rate rise to an inflation report, and the next report is due in May.

'Is the Bank brave enough to move this week and risk having people think it is responding to the housing market?'