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Thursday, June 07, 2007

Interest Rates

The Bank of England will announce its decision on interest rates in the next couple of hours.

Pundits do not expect any change, this month, on the current rates of 5.5%. However, it is expected that there will be at least one further rate rise this year.

The consumer price index (CPI) is currently at 2.8%, well above the 2% target that the government has set.

The effect on the housing market will not be pleasant, should there be another ate raise.

I cannot help but observe that had Gordon Brown not removed house prices from the inflation index, then much of this pain could have been avoided. Interest rates would have been raised some time ago, thus slowing the housing market down long before the current excess levels were reached. This in turn would have prevented people from overburdening themselves with debt.

The market correction, as and when it comes, may well be painful for many.

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