To raise or not to raise interest rates? The Old Lady of Threadneedle Street is about to face an uncomfortable decision, one suspects.

On the one hand the economic recovery remains muted, and millions of homeowners are still mired in debt. Hiking rates significantly any time soon might tip many over the edge. And that is without taking into account the effects of yesterday's slasher budget.

On the other hand inflation is too high, and has been for months. Month in month out the number come in above target. And, worse still, inflation is set to take off even further once VAT is hiked to 20% in January.

Failure to act now could deal a hammer blow to the Bank's reputation, and the interest rate setting Monetary Policy Committee knows it.

So what do you think, should the Bank hike rates now or any time soon, and if so by how much?

And more to the point, will they? Dare they?

Interest rates should rise immediately to strengthen the Pound, knock out inflation, and encourage saving rather than spending and living on credit. The economy will not recover in any real sense until the underlying problems are cured and an increase in interest rates would be a good start. Debtors would not like it but they are part of the problem.

The economy is already being directly effected by the actual interest rates being charged by the banks. The only major group of borrowers that would be hit by a rise in base rate would be those on tracker mortgages. The danger as I see it is that the house price bubble will be pricked by a significant increase in the number of houses coming onto the market under stress conditions.

As always, there are two sides to the house price argument, but I take the view that having such an inflated market overhanging the economy will be unsustainable when the other effects of the Budget and cuts in spending really bite. So in that scenario I favour an increase in interest rates to begin the house-price deflation whilst there is still enough economic activity to make the decline more gradual than it would be when all the other potential negatives are really biting.

The other positive benefit of higher rates would be the strengthening of the pound, which would reduce the exchange rate pressures that are a major cause of our current inflation.

Anonymous 2 needed this 'Off the Record'

With seven times more savers then there are debtors, I am with Ian on the need to raise interest rates now.
Having worked very hard all my life and accumulated a significant nest egg to keep my wife and myself in our retirement, such that we are not dependant on anyone else, low interest rates has caused a part of our interest-based income to drop 84% compared to when we retired. We are fortunate that what remains is still more than we need but the consequences for other responsible members of our community must be devastating.
Living in debt is to live with someone else controlling one's life. Raising interest rates, even it causes a squeeze on those that live by using someone else's money, is the correct thing to do.
It is similar to weening people off the culture of accepting handouts from the State from benefits. I personally know people who are on invalidity benefit who are not incapacitated just idle scroungers.
Britain has lost it's way I'm afraid.

Anonymous 3 needed this 'Off the Record'

The VAT increase and the cuts will act as a brake on the economy anyway, we do not need interest rate rises. Savers may like to see higher returns on cash but that will only screw the economy further