Britain's commercial banks, heeding a signal from the Bank of England, on Tuesday announced a half percentage point increase in their base lending rate to 9.5 percent. A rise in the benchmark lending rate, the fourth this month, was expected following a government report Monday of a sharply wider, record merchandise trade deficit, which sent the pound and the London stock market reeling. The report, and the markets' reaction, fueled speculation that the government would push up interest rates to cool the economy's growth, by discouraging consumer buying, and to counter inflation. Some analysts had expected the central bank to go as far as signaling a one percentage point gain. Another half-point increase might follow shortly, analysts said. The central bank signaled the half-point increase at midday by raising a key money market intervention rate of its own. Major banks, such as Barclays Bank PLC, Midland Bank PLC, National Westminster Bank PLC and Lloyds Bank PLC, announced they were increasing their rate. The banks also increased the base lending rate half a percentage point on June 2, June 6 and June 22. Corporate borrowers can obtain loans at a percentage point above the base rate. Britain's merchandise trade deficit soared to a record 1.705 billion pounds, or $2.9 billion, in May, with imports running at their highest level since last summer, the government said in its Monday report. The pound, which plummeted 4 cents Monday to $1.7030 from $1.7430, was quoted at $1.7260 after the rate increases Tuesday. The Financial Times-Stock Exchange 100-share index was down around 3 points at the 1,838 level by midday Tuesday. It fell 29.8 points, or 1.6 percent, to 1,841.5 in the previous session.
