It is 4 months since our last analysis that suggested that the interest rate trend is likely to resume upwards, in that time interest rates have moved sideways, but now with the 3 month LIBOR rate rallying to above 4.7% that sideways trend is coming to an end and signaling a resumption of the uptrend towards our target of 5.75% ! Which would roughly equate to a base rate of at least 5.25% !, The time line for this now has to be moved forward by some 4 months and is now pointing to some time in early 2007.

On the other hand should the recent break higher from the sideways action prove false, AND the 3 Mth LIBOR breaks lower i.e. below 4.4%, then it is likely that the analysis is wrong and we could see much lower interest rates. But for the time being at least UK interest rates look set to go much higher than the recent high of 4.75% by early 2007, regardless of much of the media STILL betting on lower interest rates.

(c) MarketOracle.co.uk 2005-2006

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