Interest rate increases: not out of woods yet says Bank

Bank of England figures have indicated that a further increase in the base rate of interest before the end of the year is a very real risk.

Following last week’s 0.25 per cent increase in interest rates, a Bank of England report on inflation has warned that it is well above the bank’s target and expected to get worse.

The bank has a guideline figure of 2.0 per cent for inflation. It has recently been running at 2.5 per cent, prompting the increase in the cost of borrowing to cool the economy.

The report indicated that the pressures behind the increases are not expected to cool any time soon however, and a further increase in rates could come as soon as November.

“A number of influences are expected to push up inflation in the latter part of 2006,” the report states.

“Since the [last inflation report in] May, oil prices have risen further. And a few energy companies have announced further increases in domestic gas and electricity prices since the May report.

“In addition, increases in university tuition fees could push up CPI inflation later in the year.” Renewed house price growth is also said to have surprised and alarmed the bank.

Any increase would spell renewed woe for those with variable or tracker rate mortgages as the best mortgage rate increased once more.

© Adfero Ltd

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