06 February 2004	Friday	14 Zilhaj 1424

LONDON, Feb 5: The Bank of England announced on Thursday its second interest rate increase within just three months in response to mounting signs that an economic recovery is gathering steam.

The central bank's nine-member monetary policy committee voted to raise the main official lending rate by a quarter point to 4.0 per cent at their monthly meeting, it said in a statement.

Last November the Bank of England became the first of the world's four major central banks to hike rates for several years.

The European Central Bank in Frankfurt announced shortly afterwards that it was leaving the main official lending rate in the eurozone unchanged at 2.0 per cent, where is has been since June last year.

The Bank of England meanwhile hailed growing evidence of an economic revival.

"The world economic recovery has become more broadly based," it said in a statement.

In Britain output growth in the second half of last year was above trend and business surveys pointed to a further pick-up in the first quarter, it said

Analysts say the Bank of England appears particularly concerned about soaring consumer debt and sizzling house prices, which could store up trouble for the future.

The Bank of England, in the cautious language typical of central banks, noted that "household spending and borrowing have been resilient, and the housing market remains strong."

"Although sterling has appreciated, continued growth above trend means that inflationary pressures are likely to pick up gradually over the next couple of years," the statement said.

Sterling has roared up to 11-year highs above $1.8 recently, having jumped by about 20 per cent over the past year.

A stronger currency is seen as a reason not to raise interest rates because it helps to tame inflation by reducing import costs and also makes life harder for exporters.

However, the decision provoked dismay from some quarters of the business community, with the British Retail Consortium criticizing the hike as "unnecessary".

The Confederation of British Industry was more sanguine, saying that "business understands that investing in a small early increase might keep inflation in check and protect economic stability."

The decision came as no shock to analysts.-AFP