18 April 2007
The Bank of England will be forced to explain itself to chancellor Gordon Brown this week after it was revealed that the consumer price index (CPI) showed inflation to have risen to 3.1%.
This exceeds Labour's self-set "golden figure" by over 1% and while fiscal experts are generally predicting that this is a momentary blip and that CPI inflation will fall back towards 2% in the next few months, borrowers will be nervous of the near definite interest rate rises ahead.
Several financial experts have spoken out about the results, with Howard Archer, economist at Global Insight, telling The Daily Mirror: "This is a thoroughly nasty set of data."
Jonathan Said, senior economist at the Centre for Economics and Business Research, added: "This opens the possibility of interest rates rising beyond 5.5% towards 6%."
At the last meeting of the monetary policy committee (MPC), the members chose to maintain the rate of interest at 5.25% but some financial analysts are now predicting that the inflation rise will prompt a quarter point increase at the next MPC meeting.
In an open letter from the Bank of England's governor Mervyn King, the inflation rise was blamed on blamed the rise on increases in food, household goods and a fresh leap in petrol and oil prices.
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