Michael Harrison's Outlook: Mervyn's Magnificent Seven jump the gun on interest rates, and homeowners pay the price

A one-off pre-emptive strike or the first in a series of increases? The Monetary Policy Committee's decision to raise interest rates yesterday by a quarter of a point surprised the markets almost as much as its quarter-point cut did last August. What the accompanying statement from the Magnificent Seven (the committee is two short until October) failed to clarify, however, is whether we can now expect a gradual ratcheting up of rates or whether yesterday's small tightening of policy will be judged sufficient.

Some light will be shed with next week's quarterly inflation report from the Bank of England. But for a better guide we will have to wait another week for the publication of the minutes of this month's MPC meeting.

If yesterday's vote was 7-0 in favour of a rate rise, then it would indicate very strongly that more increases are on the way. If, as seems more likely, it was a split decision, with the Governor Mervyn King taking advantage of an under-strength committee to get his hawkish way, then it will lend weight to the theory that this was indeed a one-off move.

The best guess is that it was the latter, for it is hard to see what could have resulted in such a sharp swing away from the doves in the space of a month. After all, the committee voted 7-0 to keep rates unchanged in July.

The Bank's statement highlights the quickening pace of the economy in the last few months and the prospect of inflation remaining above its 2 per cent target for some time.

But in truth there is little evidence of inflation in the economy beyond rising energy prices, which are immune from movements in interest rates anyway. Moreover, high energy costs have their own deflationary effect - there is a powerful incentive to spend less when it costs ?1 a litre to fill up and ?1,000 a year to heat and light the average home.

The Bank concedes that it is extremely hard to predict what will happen to energy prices in future. It reckons they will moderate in the medium term but that rising pay settlements and profit margins will take the place of energy in keeping inflation stubbornly above target. In as much as that points in a direction, it points to the possibility of another rate rise.

In the meantime, one thing does look certain. The rising tide of bad debts and personal bankruptcies we have heard so much about from the high street banks this week is not about to recede. Indeed, yesterday's quarter-point rate rise will undoubtedly have the effect of pushing more borrowers under the water.

For that reason alone, the least the Bank could have done was to wait until the MPC is back to full strength before deciding to raise rates for the first time in two years.

The paralysis in housing policy

No mention of rising property prices in yesterday's rate announcement, which is perhaps just as well for Ruth Kelly, the latest minister to be put in charge of what passes for government housing policy.

One reason prices are rising is the chronic under-supply of new houses - something which Ms Kelly, like her predecessors Yvette Cooper and Two Jags, seems powerless to do anything about. Her Department for Communities and Local Government estimates that 209,000 new houses a year are needed in England alone to keep up with demand. Last year, 155,000 were built.

Iain Napier, the chief executive of Taylor Woodrow, sums the problem up neatly. Ms Kelly may be full of good intentions and well-versed in strategy but the implementation is completely lacking. Two years after the Barker Report made some sensible suggestions for streamlining the local planning process, precisely nothing has happened. There is still no consistency between local authorities as to design and density of new housing, much less how long the planning process should take. If a housebuilder is lucky, it could be nine months. With some councils it takes three years. The reason housebuilders hold those much-criticised land banks is that they never know when they are going to get planning permission.

The Government has now come up with the bright idea of a tax each time land is released for development which, if anything, threatens to slow down the supply of new housing even further. There is one way Ms Kelly could break the logjam and that is by abolishing so-called section 106 agreements which allow local authorities to demand a new playground, school or roundabout in return for approving a housing project.

If the authority could be sure instead that the development tax would flow to its coffers and not Gordon Brown's, that could be an acceptable trade off. But there is no clarity on this.

Meanwhile, local authorities are happy to continue playing the system. Before he was relieved of his local government responsibilities, Two Shags introduced an arrangement whereby local authorities receive financial incentives for speeding up the planning process. The Government claims this has resulted in a 15 per cent reduction in delays. In reality, nothing has changed. Local authorities now spend three months talking informally with housebuilders, miraculously shortening the formal planning process, and then wait to collect their reward. If Ms Kelly wants to do something practical, she could start by stamping out this abuse.

Sly takes a good long look in the Mirror

Trinity Mirror's chief executive, Sly Bailey, has lost no time tightening her grip on the company following the departure of its chairman, Sir Victor Blank.

Two months after he left, she has ordered a top-to-bottom strategic review of the business. Most people assume that Sir Victor, despite his protestations to the contrary, was all that stood in the way of a break-up of the business. For that reason, there is a widely held assumption that her strategic review is merely management shorthand for selling off the group's national newspaper titles. That may well be the outcome when the review is completed come Christmas. But it is not necessarily the case. There are plenty of other things for the review to chew over. How, for instance, can the group gain more leverage out of the fact that, one way or another, it reaches 40 per cent of the population each week? And does its future lie in digital, where it has spent heavily in the past 18 months buying up businesses such as the recruitment website Secs in the City (geddit?)

There is only any point in splitting up the regional and national businesses if they are proven to be more valuable on their own than together. No doubt Ms Bailey and her new chairman, Sir Ian Gibson, will look enviously at the price the Barclay Brothers paid for the Telegraph Group. But they were buyers in search of a trophy asset. It is not clear that the Mirror titles necessarily fit the same category and are capable of commanding the same premium. A succession of managers, from David Montgomery to Ms Bailey's predecessor, Philip Graf, have battled in vain to exploit the Mirror's potential. Ms Bailey's answer has been to cut costs remorselessly.

The last thing she wants now surely is a repeat of the fiasco at the Daily Mail and General Trust, where the Northcliffe regional newspaper business was put up for auction and then just as quickly withdrawn from sale after failing to reach its reserve price.

m.harrison@independent.co.uk