Worries Over Rising Rate Of Inflation
The rate of inflation in the UK is still on the increase according to new figures released yesterday. The Bank of England announced that the rate for the month of April had risen to 3%. This is an increase of 0.5% over the previous month and a whole point above the Bank’s target rate of inflation of 2%.
The main reason given for this increase is due to a sharp rise in costs of basic food items, such as a loaf of bread, and dramatic increases in fuel prices, which have soared to record levels in recent months with a litre of diesel fuel now costing over £1.20.
The Bank of England’s Monetary Policy Committee (MPC) now face a tough time, with some difficult decisions to be made. On the one hand they need to address the problem of rising inflation, which means keeping interest rates high in order to reduce the rate to nearer the 2% target. On the other hand the Bank needs to be seen to be offering assistance to the ailing housing market and in particular, those individuals who are struggling with their repayments on their mortgages and other loans, or approaching the end of a low cost fixed rate deal. This would mean a reduction in interest rates, which in turn would exacerbate the problems with increasing inflation.
The Bank’s MPC made the decision to keep interest rates at the same rate of 5.0% at their monthly meeting held last week, with wide predictions from experts that the rate would be reduced again at the next meeting in June. With the rate of inflation now at 3% it now seems unlikely that there will be an interest rate cut next month, with the reduction being postponed to later in the year. All this comes as another blow to home owners, who are not likely to see the cost of their mortgages and loans reduce in the short term.
