The rate rise that no one really requires

Predicting what will happen to interest rates is a mug's game, and never more so than on the day that the Bank of England's monetary policy committee announces its monthly decision. But it would come as a real shock - not least to Gordon Brown - were rates not to go up today.

The chancellor has made his feelings clear. He wants rates higher to prevent the strength of demand from igniting inflationary pressure. In fact Mr Brown is pushing at an open door; a majority of the monetary policy committee is concerned enough about the tightness of the labour market, rising house prices and the re-emergence of equity withdrawal to fund consumption to nudge up rates.

So far, so predictable. But whether a further modest tightening of monetary policy is what the economy needs is another matter. There are really two points at issue: does the UK actually need higher rates to curb inflation, and will the drip-drip approach work if it does?

On the first question, the argument is far more finely balanced than the hawks on the MPC and in the treasury would have us believe. Inflation excluding mortgage interest payments is at 2.2%, below the government's 2.5% target. Without the effect of oil prices it would be 1.5%, the level at which Eddie George would be obliged to write a letter to Mr Brown explaining what he planned to do to get inflation up.

Of course, a 150% increase in oil prices can have inflationary consequences, but only if there are second-round effects on domestic wages and prices. Thus far, there is no indication that there has been; competition remains cutthroat in the retail sector and pay settlements have been edging downward.

One reason why wages have been well-behaved is that headline inflation has been low.

Inflation according to the all-items retail prices index hit 1.1%, its lowest since 1963, last summer but has since been heading higher due to dearer mortgages. Most pay deals still use the headline inflation rate as a benchmark, so higher rates may have a perverse effect at a time when workers seem to have little fear of losing their jobs.

Finally, there is the pound. Hoisting up rates by a quarter-point will have zero impact on those bits of the economy in the south east that are overheating, but will inflict great damage on those parts of Britain still heavily dependent on manufacturing. None of this will prevent the inevitable happening today but it may explain why Labour faces growing trouble in its heartlands.

Sky high


It would be easy to dismiss BSkyB's £250m internet-linked investment programme as another example of "me too" thinking. Embracing the brave new worldwide web is always good for a boost in the share price.

Think no further back than Tuesday, when Reuters announced a £500m investment programme to move its business online. Reuters' shares went up 23% on the news. Yesterday BSkyB was similarly blessed with the market brushing a first-half pre-tax loss of £61.5m and sending the share price up by a fifth. There is a world of difference, however, between the unthinking rush into anything dot.com and serious investment by heavyweights like Reuters and BSkyB. Given the way the industry is going they have little choice.

The stock market is right to focus on forward-looking strategies designed to exploit the opportunities presented by the internet rather than what has happened over the last six months - although that said, the increase in BSkyB's subscriber base is to be welcomed, too.

A Life too far


Yesterday as Standard Life was helping to settle NatWest's fate, a group of policyholders was opening its own campaign to force the life insurer to change from a mutual to a public company.

The threat seems little more than a small cloud on a far horizon. The Stan dard Life Members Action Group has done no more than clear the first, easy, hurdle - collecting the signatures to requisition a meeting.

Unfortunately the numbers being dangled before with-profits policyholders - anything up to £6,300 - mean the issue is unlikely to go away.

The mutual movement has already lost too many members for it to be able to shrug off the loss of a company like Standard Life, and it is hard to see what arguments - other than of the "greed is good" variety - could be advanced for turning Standard Life into a public company.

It is a formidable competitor in its traditional market and its recent initiative, Standard Life Bank, is taking on established mortgage lenders to considerable effect. Indeed, some of Standard Life's rivals might like to see it floated on the stock market, where it would have to divert resources to pay shareholders.