British Interest Rates Rise for 3rd Time This Month

Britain raised interest rates on Wednesday for the third time this month in the government’s continuing campaign to dampen a credit-fueled consumer buying spree that it fears will rekindle inflation.

The Bank of England, Britain’s central bank, raised its money market lending rate by half a percentage point to 9%. The other rises this month, also by half a percentage point each time, occurred on June 2 and 6.

“We will not take risks with inflation,” a spokesman for the British Treasury said of the rate increase. British financial markets had been anticipating the rise since late last week.

A Bank of England spokesman said the increase was aimed at keeping credit tight to bear down on inflation.

He would not say if the increase was coordinated with other nations. West Germany raised a key interest rate Tuesday.

British Chancellor of the Exchequer Nigel Lawson said in Toronto on Tuesday that the just-completed Group of Seven industrial nations’ summit now had cooperation policies on inflation as well as on currency exchange rates.

Big Banks Follow Suit

“The policies which we have agreed on--both on inflation policy and on exchange rate policy--may have consequences for interest rates and interest rate differentials,” Lawson said, adding, “But that is a matter for each country to decide for themselves.”

By raising the money market lending rate, the Bank of England signals British commercial banks that it wants them to raise all their lending rates.

The National Westminster Bank and Barclays Bank, Britain’s biggest and second-biggest banks respectively, quickly obliged by raising their base lending rates to 9% from 8.5%.