The Bank of England is set to raise interest rates next month, analysts said at the weekend, after official figures revealed that the economy is expanding rapidly.

Last week we reported that inflation figures had put a predicted interest rate hold into doubt. Now, official figures released Friday further strengthen the case for a rise. The figures show that the economy roared ahead at the end of last year with fourth quarter growth at 0.9 percent, the fastest rate since early 2000.

Other factors

House price were "once again above expectations" said the Bank of England’s Monetary Policy Committee in its minutes of January’s meeting, clearly signalling concern over the housing market’s refusal to respond to November’s interest rate hike. The committee said that a quarter-point rise in November had done little to dampen growth in either property prices or consumer demand.

The Bank of England has frequently said that it is concerned over the level of household indebtedness and figures also out last week from the Council of Mortgage Lenders showed that homeowners borrowed 25 per cent more money last year than in 2002.

With mortgage lending figures from the British Banking Association also revealing another growth spurt in December it’s likely that the MPC will seriously consider raising rates next week.

Only one member, Sir Andrew Large, the deputy governor responsible for financial stability, was seriously concerned enough about household debt to vote for an interest rate increase at January’s meeting, however the rocketing economy is likely to bring other members in line in February, say analysts.