Rate rise 'will hamper economy'

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The expected interest rate rise tomorrow will hit borrowers and could create economic weakness, experts say.

The Bank of England’s rate setting committee is expected to increase the base rate 0.25% to 5.5%. “But the Bank needs to beware of overkill,” warns Simon Ward, chief economist as New Star Asset Management. “The three earlier hikes coupled with a 5% rise in the exchange rate over the last year have tightened monetary conditions significantly. There are signs that growth is beginning to slow, while inflation news is set to improve. A move beyond 5.5% would risk unnecessary economic weakness in 2008.” Tomorrow’s rate rise is inevitable, agrees Neil MacKinnon, group economist at mutli-curre...

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