Industry reaction to the rise in Bank base rate is likely to be relatively muted, according to Paul Niven, head of asset allocation at F&C Investments.
Commenting, Niven said: "Investors had fully priced in the 25 basis points move. Next week's Quarterly Inflation Report will be closely scrutinised, however, as participants will look at the Bank of England's new forecasts in an attempt to establish how many future rises can be expected. Considering the strength of economic data we have recently seen and the increasingly hawkish tone from certain MPC members, many also expect another hike in the first half of next year, as the committee becomes increasingly concerned over inflationary pressures feeding through to wage inflation.
"Another hike in 2007, however, is fully discounted by the market, and we would expect that as 2007 progresses, interest rate cuts could again be on the agenda in the second half of the year as global cyclical momentum fades."
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