Brown gives green light to higher interest rates

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Chancellor Gordon Brown is expected to give the Bank of England the green light to increase rates next week, despite the official inflation rate threatening to drop below the 1% level at which point the Bank must write to the Treasury explaining its policy decisions.

Leaked excerpts of a speech due to be delivered before the Institute of Directors later this afternoon indicate the chancellor will stress “monetary discipline” and “stability” as key goals, rather than government intervention in monetary policy. Brown is expected to make reference to “failed” policies of the Conservative government in the late 1980s and early 1990s, when interventionist monetary policies led to a severe “boom and bust” cycle. The City expects the Monetary Policy Committee to increase the base rate by at least 25 basis points next week, following statements from sever...

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