Bank of England Governor Sir Edward George warned financial markets today they should not get too carried away with the idea that British interest rates are set to rise sharply this year.
Sir George was speaking on the day that the Royal Institution of Chartered Surveyors (RCIS) reported a rapid acceleration in house prices in England and Wales last month.
He told the Euromoney Bond Investors' Congress that too much weight should not be placed on the steepness of the short-term interbank interest rate futures curve as an indicator of the likely course of official short-term interest rates - at least in Britain.
The market is currently predicting interest rates, which were cut aggressively to a 38-year low of 4 per cent last year as recession loomed over the global economy, will be raised to around 5.25 per cent by the end of 2002.
The June short-sterling interest rate futures contract rose 0.130 on the day to 95.600, indicating a rise in base rates to around 4.5 per cent by mid-year. The December contract also rallied 0.120 to 94.930, suggesting rates around 5 per cent by year-end.
The pound was steady near its day's lows to the dollar at $1.4228 GPB, while the FTSE 100 index showed a 35-point loss at 5,120 at 9.59 a.m.