August 9, 2007 (LPAC)--Bank of England Governor Mervyn King gave what has been taken as a clear warning that interest rates will continue to rise, in his statements at the release of the BoE's Inflation Report yesterday. 

"Interest rates are not policy instruments for protecting unwise lenders from the consequences of their decisions," King said, following many claims in the international financial press that things were settling down and there was a "new appetite for risk." Interest rates, now 5.75%, will likely go to at least 6% this year. "In the past few weeks there have been falls in equity prices and credit spreads have widened, especially on riskier debts. We don't know whether these tremors in financial markets signal a more disruptive movement to come, or constitute a gradual release of pressure on spreads that had built up over some time. So it's impossible at this stage to judge how large and how persistent this tightening of credit conditions is likely to be." King said there is "greater-than-usual uncertainty about the outlook for inflation," the excuse used to hold or raise interest rates.