Take me higher

3 February 2004

The two economies similarities are striking. Both are highlyindebted, growing strongly, with rising deficits and low inflation. Yet UK rates are expected to rise to 4% this week four times higher than in the US. A rise in US rates may come sooner than many believe.

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The Bank of England is widely expected to raise interest rates by 25 basis points to 4% when it meets this week, and may raise rates higher still this year.

US interest rates are currently at 1%, with no increase expected soon.

However last week, the Federal Reserve dropped the commitment it first made five months ago to keep interest rates low for "a considerable period." Instead, the Federal Open Market Committee said after its first twoday meeting of the year that it can be "patient" in raising rates because inflation was low and the economy still hadn't fully recovered.

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