Experts split on interest rate rise

Economists say it will be a "close call" for the Monetary Policy Committee (MPC), with fresh economic data showing the economy to be in rude health increasing chances of a further rise to 5.5% this month.

The Bank is widely tipped to up rates before the summer, but opinion is split between a hike this month or in May.

Typical homeowners with a £100,000 mortgage will have to fork out an extra £16 a month on average in mortgage repayments if the base rate does increase by another quarter point.

It would also be the fourth rate rise since last August and the third in just six months, seeing homeowners on average paying £63.79 more in their monthly mortgage bill than they were before last August's first rise, when rates stood at 4.5%.

Howard Archer, Global Insight chief UK economist, said it was a 50/50 decision, but added the chances were marginally leaning towards the MPC holding fire for one more month.

He said: "We expect the Bank of England to lift interest rates to 5.5% by May at the latest as a precautionary measure aimed at containing medium-term inflation risks and we would not be that surprised if the MPC acted as soon as today."

The latest figures on UK business activity indicate that market pricing power is still strong, adding to the view that the economy could absorb another rate increase.

Inflation rose again in February when the Consumer Prices Index increased to 2.8% from 2.7%, while high street sales figures at the end of last month revealed that shoppers have been spending regardless of the recent spate of rate rises.

And Nationwide's house price index, out on Wednesday, showed that property values are still rising by 10% a year.