BANK of England officials must avoid the temptation to raise interest rates, the latest Treasury-modelled Ernst & Young economic report warned today.
"A premature move to increase could collapse the housing market, hit the high street and could precipitate a debt deflation scenario," said economic adviser Peter Spencer.
Ernst & Young predicts gradual increases in the base rate next year, stabilising at around 5.0 per cent in 2005.
More "optimistic sentiments" do not hide the ever-widening gap in the UK public finances.
The public sector deficit of £14.4bn in the first five months of the 2003 financial year is nearly double the £7.9bn seen in 2002.
"Why are the figures so bad? Tax receipts are down on predictions made earlier this year in the Budget and are way down on the 1999/2000 boom."
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