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    a problem.

    1. Higher energy prices are likely to be an issue. Continued rising demand from India and China is putting pressure on commodities causing prices to rise. In particular this mean

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    On January 17th 2006 the MPC raised interest rates to 5.25%. The decision to raise interest rates, was seemingly justified a couple of days later, when inflation rose to an 11 year high of CPI 3%. This is on the edge of the governments inflation target of 2% +/-1. Although inflation is low by historical standards the MPC will be keen to move inflation back to its inflation target and maintain the strong credibility of monetary policy. Thus with inflation currently above its target the likelihood of interest rates rising is quite strong. Higher interest rates will dampen demand and hopefully keep inflation in check.

    Therefore changes to interest rates will depend a lot on inflationary trends. There are several factors to suggest that inflation could continue to be a problem.

    1. Higher energy prices are likely to be an issue. Continued rising demand from India and China is putting pressure on commodities causing prices to rise. In particular this means

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    . This is on the edge of the governments inflation target of 2% +/-1. Although inflation is low by historical standards the MPC will be keen to move inflation back to its inflation target and maintain the strong credibility of monetary policy. Thus with inflation currently above its target the likelihood of interest rates rising is quite strong. Higher interest rates will dampen demand and hopefully keep inflation in check.

    Therefore changes to interest rates will depend a lot on inflationary trends. There are several factors to suggest that inflation could continue to be a problem.

    1. Higher energy prices are likely to be an issue. Continued rising demand from India and China is putting pressure on commodities causing prices to rise. In particular this mean

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    ntain the strong credibility of monetary policy. Thus with inflation currently above its target the likelihood of interest rates rising is quite strong. Higher interest rates will dampen demand and hopefully keep inflation in check.

    Therefore changes to interest rates will depend a lot on inflationary trends. There are several factors to suggest that inflation could continue to be a problem.

    1. Higher energy prices are likely to be an issue. Continued rising demand from India and China is putting pressure on commodities causing prices to rise. In particular this mean

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    nd hopefully keep inflation in check.

    Therefore changes to interest rates will depend a lot on inflationary trends. There are several factors to suggest that inflation could continue to be a problem.

    1. Higher energy prices are likely to be an issue. Continued rising demand from India and China is putting pressure on commodities causing prices to rise. In particular this mean

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    a problem.

    1. Higher energy prices are likely to be an issue. Continued rising demand from India and China is putting pressure on commodities causing prices to rise. In particular this means the lower manufacturing prices we have been enjoying from China will become less significant. Inflation is also starting to creep up in other industrialised countries, although not as much as UK.

    2. UK housing prices have continued to rise at a rate above inflation.(9%) in 2006. The MPC isn’t directly influenced by house prices, but rising house prices tend to feed through into higher inflation because people have more wealth and confidence to spend.

    3. The minor increases in interest rates may not be enough to reduce spending in the economy. It is true they will impact on those with very high mortgage payments, but there is a significant sector of the economy which are not effected by interest rates very much (e.g. people who have paid off most of their mo

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