November 10, 2006	Friday	Shawwal 17, 1427

LONDON, Nov 9: The Bank of England on Thursday pushed British interest rates up by a quarter-point to a five-year pinnacle of 5.0 per cent as the central bank sought to keep a handle on inflation.

The announcement, which had been widely forecast by analysts, means that British borrowing costs are now at the highest level since before the September 11, 2001 terror attacks in the United States.

The BoE said on Thursday that British 12-month inflation was likely to move further above its 2.0 per cent target in the months ahead, before heading lower.

“It is likely that inflation will rise further above the target in the near term, but then fall back as energy and import price inflation abate,” the central bank said in a statement announcing on Thursday’s decision.

The last rate move was in August, when the central bank’s rate-setting Monetary Policy Committee sprang a surprise quarter-point increase to 4.75 per cent in a move that was also aimed at controlling inflation.

Inflation fell to 2.4 per cent in September from 2.5 per cent the previous month -- but remained above the BoE’s government-set target for the fifth month in a row.

The BoE added: “Although unemployment has continued to edge up, the margin of spare capacity within businesses appears limited. Oil prices have dropped back, but there are signs that other pricing pressures have picked up.

“Against that background, the committee judged that an increase in bank rate of 0.25 percentage points to 5.0 per cent was necessary to bring CPI inflation back to the target in the medium term.”

The upwards move chimed with market expectations, but the accompanying statement was found lacking, according to analysts.

“The 25 basis point interest rate hike was universally expected, but the Bank of England’s statement gives few clues on whether interest rates are likely to head higher in 2007,” said Global Insight economist Howard Archer.—AFP