LONDON: The Bank of England lifted official interest rates by a quarter of a percentage point to 5.75 percent on Thursday in an attempt to put a lid on persistent inflation, the fifth increase in less than a year.

The widely expected move confirmed Britains place at the top of the interest rate table of the worlds seven wealthiest nations as the European Central Bank held its own rate unchanged at 4 percent.

British interest rates are now at a six-year high as the Bank of England struggles to contain rising prices and a booming housing market.

Inflation has moderated somewhat since hitting a 3.1 percent peak in the year ending in March, but at 2.5 percent in the year ending May it remains well above the governments 2 percent target.

The housing market also continues to grow, although there are signs that it is expanding at a slower pace.

The banks monetary policy committee said that inflation is likely to continue to fall back to its 2 percent target over the rest of the year.

However, it added that it determined an increase was necessary because “the balance of risks to the outlook for inflation in the medium term continued to lie to the upside.”

The ECB has had more success in containing inflation in the 13-nation region that shares the euro by raising rates about once every quarter since December 2005 and prices appear to be under control while unemployment is falling.

Anticipation of the Bank of Englands decision drove the pound to 26-year highs above US$2. The announcement gave the pound another slight push, lifting it to US$2.02, its highest since mid-1981, before it settled back slightly to US$2.0190 in early afternoon trading.

“Despite some tentative signs that higher interest rates may be starting to dampen consumer spending and slow the housing market, significant upside risks to longer-term price stability persist from firms pricing power, excessively buoyant money supply growth and possible capacity constraints amid ongoing healthy growth,” said Howard Archer, chief U.K. and European economist at Global Insight.

“Furthermore, there is still a risk that pay could move significantly higher over the coming months, even though wages have remained broadly contained so far.”

Archer added that the banks statement gave few clues about future interest rate movements.

WASHINGTON: Big Wall Street investment companies are taking advantage of the Federal Reserves unprecedented offer to secure emergency loans that are part of a major effort by the central bank to help a financial system in danger of freezing.

The companies averaged $13.4 billion in daily borrowing over the past week from the new lending facility, the central bank said Thursday.

The report does not identify the borrowers.

The report was released as European central banks injected piles of fresh cash into the financial system in an attempt to get nervous banks through the Easter holiday weekend.

On top of adding more liquidity, Mervyn King, the governor of the Bank of England, met with top British bankers to discuss ways to restore “more orderly” market conditions.

The Fed, in a bold move Sunday, agreed for the first time to let big investment houses get emergency loans directly from the central bank. This mechanism, similar to one available for commercial banks for years, got under way Monday and will continue for at least six months. It was the broadest use of the Feds lending authority since the 1930s.

Goldman Sachs, Lehman Brothers and Morgan Stanley said Wednesday that they had begun to test the new lending mechanism.

On Wednesday alone, lending reached $28.8 billion, according to the Fed report.

The Fed created a way for investment companies to have regular access to a source of short-term cash. This lending facility is seen as similar to the Feds “discount window” for banks.

Commercial banks and investment companies pay 2.5 percent in interest for overnight loans from the Fed. Investment houses can put up a range of collateral, including investment-grade mortgage backed securities.

The Fed, in another rare move last Friday, agreed to let JPMorgan Chase secure emergency financing from the central bank to rescue the investment bank Bear Stearns from collapse. Two days later, the Fed backed a deal for JPMorgan to take over Bear Stearns.

Thursdays report offered insight on how much credit was extended to Bear Stearns via JPMorgan through the transaction the Fed approved last Friday. Average daily borrowing came to $5.5 billion for the week ending Wednesday.

Separately, the Federal Reserve said it would make $75 billion of U.S. Treasury securities available to big investment companies next week. Investment houses can bid on a slice of the securities at a Fed auction next Thursday; a second is set for April 3.

The Fed will allow investment companies to borrow as much as $200 billion in safe Treasury securities by using some of their more risky investments as collateral. By allowing this, the Fed is hoping to take pressure off financial companies and make them more inclined to lend to people and businesses.

The housing collapse and credit crunch have led to a record number of home foreclosures and resulted in multibillion-dollar losses for financial companies in complex mortgage investments.

THE fragility of the SNP’s victory was exposed yesterday when it was revealed one of its newly elected MSPs will shortly be absent from the Parliament on maternity leave, effectively ending the party’s chance of a majority.

Angela Constance, the representative for Livingston, is due to give birth to her first child in October.

Her expected absence will mean the SNP and Labour will have the same number of MSPs. This means that even with support from the Greens and either the Liberal Democrats or the Conservatives, the new government would be one vote short of a majority at Holyrood.

The situation could leave independent MSP Margo Macdonald in a particularly powerful position.

Yesterday, the opposition was cautious not to be seen to criticise Mrs Constance but admitted they would take advantage of the situation.

However, Alex Salmond, the first minister, insisted his minority administration would not be crippled by the loss of its one-seat majority over Labour.

And Ms Constance herself, said it would not affect her job.

The 36-year-old, who is married to businessman Garry Knox, 37, said: “Garry and I are very pleased. Many parents have obligations at work and home and we will be no different.”

Mr Salmond said no party would “stoop so low” as to seek political advantage from the situation.

He told BBC Radio Scotland: “I am quite certain that whatever differences we have with the other political parties, none of them would want to take advantage of Angela’s maternity leave in order to cause difficulties for our administration.”

If the Scottish Parliament used a pairing system, where parties agree to take members out of the vote when others are absent in order to keep numbers consistent, then Ms Constance’s absence would not matter.

But the SNP withdrew from a pairing system a few years ago.

The situation is another illustration of the delicate nature of minority government.

If any MSP is absent for a vote, whether through illness or delays on public transport, it could change the result of an important vote.

The arithmetic also affects the important parliamentary committees, which can decide whether legislation goes through. Because of the numbers, the SNP is unable to get a majority on all committees.

But Mr Salmond said the new government would work for consensus.

He gave the example of scrapping the council tax in favour of a local income tax. Although the SNP and Lib Dems differ on the detail, he said they could agree on a formula for the new tax in order to bring it forward.

“If there are difficulties we will work our way through them,” he said. “As a government which has to command a majority by persuasion and argument, we will just have to persuade and argue all the more forcibly.”

However, Labour said it would not extend any concessions to the SNP over Ms Constance’s absence, though it would not seek to exploit the situation either.

Ms MacDonald congratulated Ms Constance but said she, as well as any other opposition MSP, was sure to take advantage of the situation in order to further their own cause - in the same way either party would take advantage if an MSP was delayed in Glasgow or ill.

“I would be surprised if opposition parties did not see this as a window of opportunity,” she said. “I imagine even now, the SNP business managers are trying to come up with a timetable that will let free as little time as possible for the opposition parties to win votes. That is what happens when you have minority government.”

Speaking further about the new government yesterday, Mr Salmond promised to slim down government by reducing the number of quangoes as well as departments and executive agencies. He denied that he had ever ruled out a reduction in civil servants.

Mr Salmond also promised to reverse decisions on hospital closures that he judged were wrong and “a revolutionary step change” for Scotland’s railways with tilting trains and upgraded signals.

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