The Bank of Englands decision to raise rates in January is a sign that it is serious about keeping inflation low, says Lloyds TSB.
Trevor Williams, chief economist of Lloyds TSB corporate markets, says: The timing of the rise is a surprise but the decision isnt.
Many forecasters were expecting a move in February so while this is a month earlier than anticipated, it isnt a complete shock.
The decision is driven by concerns about inflation growing above its target while growth in the economy is strong, with manufacturing output and services output expanding.
The Bank of England is concerned that the pace of activity, with inflation above target, could induce further pay growth in the round of wage negotiations between January and April.
So this move is intended to warn that the Bank of England is serious about keeping price inflation low.