UK rates 'set for 2003 rise'

By Kevin Feddy

March 01, 2002

A top economist believes interest rates are set to rise - but not until 2003. <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o:p></o:p>  <o:p></o:p> Simon Rubinsohn believes they may go up by one per cent to five per cent to help the Bank of England meet its inflation target during 2003. <o:p></o:p>  <o:p></o:p> Mr Rubinsohn, chief economist at the stockbroking firm Gerrard, told an audience of professionals at a briefing in Manchester: "Any increase will be modest." <o:p></o:p>  <o:p></o:p> He said they are set to rise first in the US, but not too dramatically and not for some time. The UK is likely to follow suit to help the Bank of England meet its goal of 2.5 per cent inflation, said Mr Rubinsohn. <o:p></o:p>  <o:p></o:p> As the economy grows, exports will recover and consumers will take on more debt to fund their spending frenzy. <o:p></o:p>  <o:p></o:p> Those factors would be a threat to inflation, which would push up interest rates to keep it in check, he said. <o:p></o:p>  <o:p></o:p> Mr Rubinsohn, who addressed solicitors, financiers, bankers, accountants and others, said the worst seems to over in the US. <o:p></o:p>  <o:p></o:p> "The corporate sector has been caned, with its profits slashed, but the economic downturn has not been as bad as some commentators feared," he said. "There is no conclusive evidence of a recession."