Bank of England Mulls Rate Hike

Since the beginning of 2007, the Bank of England has raised Britain’s benchmark interest rate by 50 basis points, to 5.50%.  While the Bank voted earlier this month to maintain rates at current levels, many analysts are speculating that it will resume hiking rates again in July.  A recent spate of economic data has supported the notion that Britain’s economy is on stable ground.  As a result, the specter of inflation is once again looming, and the Bank, which has a reputation for monetary hawkishness, will be quick to act if inflation stays above the Bank’s comfort level.  While the rate hike could certainly put a damper on Britain’s economy, it is likely to feed continued short-term interest in the Pound, is a viable risk-free alternative to the USD.

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