KEY POINTS:
LONDON - The pound rose to a fresh 26-year high against the US dollar yesterday amid expectations that the Bank will raise rates by another quarter point this week in an attempt to curb inflation.
City concerns about continuing price pressures were heightened by figures from the Chartered Institute of Purchasing & Supply (CIPS) and from a CBI/PricewaterhouseCoopers survey.
The CIPS manufacturing activity index for June fell to 54.3 from 54.9 a month earlier, a slightly softer number but still a positive result in the sense that any figure above 50 represents growth.
This is the 23rd month in a row that has seen such a relatively healthy return. This is especially impressive given the current strength of sterling, which yesterday hit US$2.0174.
The CBI/PricewaterhouseCoopers study showed that "the financial services sector enjoyed a third quarter of strong growth, as business volumes increased at their fastest rate in over seven years".
The CIPS study highlighted "areas of concern" after firms reported the fastest increase in input costs since last September, while factory gate prices rose at a near record pace.
That will give the hawks on the Bank of England's Monetary Policy Committee (MPC) more ammunition as they argue for the quarter-point increase in interest rates they were narrowly denied last month (when the MPC voted 5-4 to keep rates on hold, with the Governor of the bank, Mervyn King, in the minority).
The abiding City view is that the Bank will raise rates by a quarter point to 5.75 per cent on Thursday.
Separately, the new Chancellor, Alistair Darling, received a little good news as annual UK output growth per worker was the best performance since 2004.
- INDEPENDENT
