Interest rates hit 5.75%

Interest rates are now at 5.75% and although I think there will be no change next month after that it is more uncertain.

The CPI measure of inflation is dropping but slowly 2.8% in April down to 2.5% in May. Whilst a downward trend continues I think there will be no change in the interest rate. Long term prospects for inflation is to return towards 2% naturally by the end of the year. So any slow or steady downward drop will hold interest rates stable. However, any increase, unless there is a short term economic reason will put an upward pressure on interest rates.

Other factors include retail and housing both not particularly strong at the moment. However wage settlements may have an effect if they start to increase. There have been a small number of agreed pay settlements a significant margin above the rate of inflation which could keep inflation high.

Overall I would expect interest rates to be stable for the next few months but I think there will be one more rate rise to come once the impact of the previous rises can be judged. I don't think interest rates will fall below 5.5% for the remainder of this year unless there is a major economic instability.

Of course I am not an economist so your opinion is as good as mine, but these are my humble thought on the subject.