Interest rates rise on a weakening economy

The Bank of England increased interest rates yesterday by a quarter percent, attempting to put the brakes on an economy overheating with inflation.

The move surprised many analysts, as it was expected that the Bank of England may leave any rate rise decisions until November.

The rise comes at a time when the UK economy continues to perform better than expected.

However, many uncertainties underpin the current growth cycle, not least above-target inflation, increasing unemployment, and mounting debts.

The UK banks have recently reported increased profits, but additionally warned that bad debt is eating into their profits.

This is especially as the numbers of insolvencies have increased sharply.

The overall picture is the UK is moving slowly into an economic downturn, with increasing unemployment with rising inflation a particular concern.

And while the housing market appears to be cooling, it appears to be increasingly as a part of the UK economy, rather than apart from it.