TheMonetaryPolicyCommitteeisclearlydividedonwhatitreckonstheeconomyneeds。

The5-4splitlasttimeattestedtothat。

Butmostoflastmonth’s‘hold’voters–ifnotall–arelikelytovoteforahikethistimeround。

Themainobjectionlasttimewasthataraiselastmonthmighthavesurprisedmarkets,whereasthey’reallexpectingonethismonth。

Soitseemscertainthatinterestrateswillriseto5。

75%tomorrow。

Butwhathappensnext?

Atfirstsight,somemightarguethatthere’snoneedtoraiseinterestrates。

RachelLomax,theBank’sDeputyGovernor,certainlyfeelsthere’snoneedtorush。

Inflationhaseasedbackfromthetarget-busting3。

1%seeninMarch,to2。

5%inMay,whileitseemsthatconsumersarealreadyfeelingthesqueezefromrisingrates。

Retailershavebeensoundingmorecautiousinrecentweeks,whilebreweryScottishNewcastlewarnedyesterdaythatfirst-halfprofitswouldbeweakerthanexpected。

TotalUKbeersaleshavefallen5%thisyear–thecompanyputtheblameonbadweather(whichforonce,mightbemorethanjustanexcuse),butitseemslikelythatworriesaboutmakinghouseholdbudgetsbalancewon’thavehelped。

However,MervynKingandtheMPCmemberswhovotedwithhimlastmonthclearly–andrightlybelievethatcreditconditionsarestilltooslack。

Withhousepricegrowthstillstrong(therearesignsofturning,butmostpropertycompanieshavegoodreasontotrytomakethemarketlookasbadaspossible,inthehopeofunnervingtheMPC),MrKingandhiscolleagueswilltrytheirverybesttoavoidmakingthemistaketheMPCmadeinAugust2005,whenahugelyprematurequarter-pointcutinratesreinflatedthehousingbubble。

Otherreportsalsosuggestthatinflationisstillmuchmoreofaworrythanofficialfiguresmightsuggest。

TheTelegraphreportsthat“foodpricesandenergybillsarerisingfasterinBritainthanalmostanywhereelseintheworld”,accordingtoanOECDreport。

Shoppersareshellingoutnearly5%morefortheirweeklyshoppingthantheydidayearago。

Andthemostrecentmanufacturingsurvey,fromJune,showsthatmanufacturersarestillhavinglittledifficultypushingthroughpriceincreases。

PaulDalesofCapitalEconomicsreportsthatthesurveysuggeststhat“thehawksarelikelytohavetheupperhandwhentheMPCvotesonThursday,andprobablyinthemonthsthereaftertoo。



AsRogerBootle(alsoofCapitalEconomics)commentedinTheTelegraphonMonday,“rateswillriseto5。

75%。

Buttheywon’tstopthere。

Reachforyourtinhats。



Meanwhile,intheongoingsubprimesaga,anotherhedgefundhascomeacropper–Florida-basedUnitedCapitalAssetManagementhasstoppedinvestorsfromtakingtheirmoneyoutofitsHorizonABSfunds,“afterheavylossestradingsubprimebondsandderivatives”,saystheFT。

Redemptionrequestsincludedonefrom“thefund’slargestinvestor,whoaccountedforalmostaquarterofthefund’sassetsundermanagement。

”Asoftheendoflastmonth,theHorizonfundsweredown15%,“butsourcessaidthat15%wasalooseestimateandthevalueoftheholdingscouldbereviseddownfurther。



Asqueezeontheconsumer,asqueezeonhedgefunds–it’slookingmoreandmoreliketheglobalcreditcrunchisuponus。

Sowherecanyouinvest?

Well,theexpertsatourlatestRoundTablemightbedividedabouttheprospectsfortheglobaleconomy,buttheydohavesomeveryinterestingsmall-capstocktipsthatshouldperformwellregardlessoftheeconomicweather。

Youcanreadallabouttheminthelatestissue,outonFriday。

Ifyourenotalreadyasubscriber,youcansignupforathree-weekfreetrialofthemagazine,justbyclickinghere:Signupforathree-weekfreetrialofMoneyWeek。

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InLondon,allthemajorindicesclosedhigheryesterday,withtheFTSE100indexofleadingsharesadding49pointstoendthedayat6,639。

AnannouncementbypubgroupGreeneKingthatitistoteamupwithaspecialistpropertypartnerboostedthesharepriceofpeersEnterpriseInnsandPunchTaverns。

ThelattertoppedtheFTSEleaderboardwithgainsofover3%。

Forafullmarketreport,see:Londonmarketclose。

OntheContinent,theParisCAC-40fell5pointstoendyesterdayat6,069。

InFrankfurt,theDAX-30was65pointshigher,at8,050。

AcrosstheAtlantic,USstocksextendedMondaysgainsasinvestorswerecheeredbymergernews。

TheDowJonesadded41pointstocloseat13,577。

Thetech-heavyNasdaqwas12pointshigher,at2,644。

AndtheSP500wasup5pointstoendthedayat1,524。

USmarketsareclosedtodayfortheIndependenceDayholiday。

InAsia,theJapaneseNikkeinotchedupitsfifthstraightdayofgains,adding18pointstocloseat18,168。

Crudeoilwastradingat$71。

24thismorning,whilstBrentspotwasat$73。

51inLondon。

Spotgoldhadrisento$654。

25thismorningasacombinationofsecurityconcerns,thehigheroilpriceandtheweakdollarpromptedbuying(formoreongold,seeourdailygoldmarketreport)。

Silverwasalsohigher,at$12。

60,thismorning。

Inthecurrencymarkets,Sterlingbreachedthe$2。

02markagainstthedollarthismorningonexpectationsofaBankofEnglandratehiketomorrow,buthadsincefallenbackto$2。

0175。

Thedollarwastradingat0。

7342againsttheeuro,notfaroffarecordlow,whilstthepoundwasat1。

4816againsttheeuro。

Andthedollarwasat122。

38againsttheJapaneseyen。

AndinLondonthismorning,hotelgroupswereheadinghigherasthesectorisbolsteredbynewsthatUSprivateequitygroupBlackstoneistobuytheHiltonGroupfor$26bn。

Intercontinentalhadrisenbyasmuchas5。

4%inearlytrading,makingittheFTSE100stopgainerofthedaysofar。

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Formoreonwhyrecordconsumerdebtandan$800mtradedeficitcouldrobthecountryofitsreputationasthelandofthefree,read:HowindebtedAmericansaregivinguptheirindependence

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