Further interest rate rise looms

The odds on a further rise in interest rates sooner rather than later have shortened following new figures from the Office for National Statistics (ONS).

The figures showed that after a slight fall in July, inflation has once again crept up, standing at 2.5 per cent.

The Bank of England has a brief of maintaining inflation below two per cent, using tweaks to the cost of borrowing in an attempt to slow or stimulate pressure.

The rate of inflation has now been running above this level since April, with the bank’s decision to raise interest rates in August an attempt to head off more drastic action.

This appears to have failed, as a wide range of household goods are now starting to creep up in price, all adding to the inflationary pressure.

Previously, much of the inflationary pressure had been credited to isolated increases in the cost of energy rather than across a broad basket of goods.

“Rising prices for items such as clothing, footwear and household goods will maintain the Bank of England’s concern that underlying inflation is starting to creep up,” said Howard Archer, chief economist at the Global Insight consultancy.

“We expect a 0.25 per cent interest rate hike in November, but believe that moderating growth will alleviate the need for further interest rises after that.”

While the base rate of borrowing affects all credit, its most marked affect is on the housing market, where it dictates the best mortgage rate deals available.

© Adfero Ltd

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