Interest rates to rise - papers 16 May

The FT says the latest inflation report from the Bank of England yesterday raises fears of interest rate rises before the current year ends.

It says the main inflationary threat comes from the prospect of workers demanding higher wages to compensate for higher National Insurance contributions.

The FT says the report yesterday "gave a strong signal that interest rates are likely to rise over the next few months.

The Times says that homeowners could start to see the cost of their mortgage repayments creep up as soon as next month if the BoE gets nervous about inflation.

"Mervyn King, Bank Deputy Governor, left markets in little doubt of an imminent rate rise," The Times says.

However, The Times also notes that a surprising jump in unemployment figures last month coupled with the possibility of another slump during the summer would force the Monetary Policy Committee to change tack again.

The Scotsman says the comments yesterday had a political overtone that may be affecting the reading of the inflationary picture.

It says that Mervyn King's comments on the rise in NI contributions leading to higher inflation will harm his chances of becoming the next governor of the BoE.

"HBOS economist Adam Chester questioned King's decision to blame higher NI contributions for the likelihood the Bank will miss its inflation goals."

"Chester said employers are likely to take time to assess the impact of NI on their wage bills, which will not come into effect until 2003, and the effect on inflation is unlikely to be seen until 2004-5."

Tony Blair pushed entry into the euro closer to the top of the political agenda with his comments on television last night, the FT says today.

The paper says the comments were timed to coincide with the coming continental holidays of millions of Britons who will be using the euro for the first time.

Recent polling figures suggest that the gap between those who want to join the eurozone and those against has narrowed in favour of the former.

The Scotsman says Blair's comments mean Britain could be in the eurozone by 2004.

The key to ushering through a successful referendum was the new deal brokered between Blair and his chancellor Gordon Brown, The Scotsman says, quoting Labour backbencher Denzil Davies, who is against the euro.

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