Rates up ‘sooner rather than later’

INTEREST rates will rise ‘sooner rather than later’ despite signs the economic recovery is slowing, according to a senior Bank of England official.

Rates have been frozen at a record low of 0.5pc since March 2009 and the Monetary Policy Committee sat on its hands once again this week.

But Kristen Forbes, who is on the nine-strong MPC, warned that a rate rise is coming.

She said yesterday: ‘I do think it is likely we will see interest rates increase sooner rather than later.’

The comments came despite official figures showing the construction sector shrank by 1pc in July as British builders struggled. The report, from the Office for National Statistics, rounded off a dismal week for the UK economy after separate figures showed exports plunged 9.2pc in July and factory output fell 0.8pc.

It was the biggest fall in exports since July 2006 and left sales of British-made goods to overseas buyers at the lowest level since September 2010.

Analysts warned that Britain is on course for a disappointing third quarter of the year following a 0.7pc rise in gross domestic product in the second.

Howard Archer, chief UK economist at IHS Global Insight, said the construction figures added to signs ‘that the economy is seeing a softer third quarter’.

A survey for the Bank by GfK found 50pc of the public expect rates to increase during the next 12 months.

The central bank’s governor Mark Carney has said that a decision about a rise would ‘come into sharper relief around the turn of this year’.