Interest rates 'won't hit six per cent mark'

A LEADING business lobby group forecast one more rise in interest rates today, but said it did not see the cost of borrowing hitting the six per cent mark.

The CBI's quarterly economic forecast predicts a quarter point increase to 5.75 per cent this autumn, followed by a cut to 5.5 per cent by the end of 2008.

Higher borrowing costs, including four rate rises from the Bank of England since last August, also prompted the CBI to cut its prediction for economic growth in 2008.

As a result of the weaker growth, chief economic adviser Ian McCafferty said the Bank should have room to bring interest rates back down in the second half of next year.

He added: "Despite the current speculation, we do not see the need for rates to hit the six per cent mark."

The Bank of England recently indicated one more rise in interest rates was likely to be needed in order to bring CPI inflation back to its two per cent target.