Rising inflation 'makes interest rate rise likely'
Published On 17 April 2007
Inflation rose sharply in March, prompting fears that the Bank of England may be forced to increase interest rates in the near future.Official figures from the Office of National Statistics (ONS) show that consumer price index (CPI) inflation reached 3.1 per cent in March - up 0.3 per cent on the previous month.
Equally, retail price index (RPI) inflation rose, increasing by 0.2 per cent to 4.8 per cent.
The ONS report cited upward price pressure from food and non-alcoholic beverages, as well as from furniture, recreational culture and transport.
This data means that that inflation has moved further away from the government target of two per cent for CPI and fuels speculation that the Monetary Policy Committee will increase interest rates when it meets in early May.
"Certainly, financial markets have now firmed up their view of another base rate rise next month," explained Barry Naisbitt, the chief economist at Abbey.
"The Bank of England's Inflation Report next month will be critical in informing markets of the extent to which the Bank still expects inflation to fall in the second half of this year after today's unexpected figure."
