Bank will not ‘hold back’ on rate rise

THE Bank of England again warned that an interest rates rise is on its way as a senior official said it must not ‘hold back too long’.

Ian McCafferty became the latest member of the central bank’s rate-setting monetary policy committee to suggest that the first hike since 2007 is fast approaching.

He said a good reason ‘not to hold back too long’ was that ‘it will be critically important that rises in bank rate are delivered, as far as we are able, at only a modest, gradual pace’.

Rates have been frozen at 0.5pc since March 2009, but increasing numbers of observers expect them to rise to 0.75pc before the end of the year.

‘The decision on when it will become appropriate to being normalisation is becoming more balanced as the economy has strengthened through the early summer,’ said McCafferty.

The pound rose above $1.70 to its highest level for more than five years as investors bet on an early rate hike.

A report by the CBI showed UK factories enjoyed another strong performance this month as the second quarter ended in style.

Katja Hall, CBI deputy directorgeneral, said: ‘Growth is broadbased, with the recovery spreading its roots, and firms have high hopes for the coming quarter. However, the recent rise in sterling could impact on the resilient export orders we have seen lately.’