Governor speaks of 'uncertainty' over future rate

It is difficult to tell what the correct policy for the Bank of England's monetary policy committee (MPC) will need to be in the months ahead, governor Mervyn King has said.

The comments came in an open letter to chancellor Alistair Darling which the governor was obliged to write after consumer price index (CPI) inflation exceeded its permitted variation range from the two per cent target, soaring to 3.3 per cent.

He stated: "The path of Bank rate that will be necessary to meet the two per cent target is uncertain."

In the short term, Mr King predicted, CPI could rise up to four per cent this year before starting to come down again.

Those thinking of moving home may find such uncertainty makes renovation an attractive alternative, as this would avoid the uncertainties over the cost of any new mortgage.

Minutes of this month's MPC meeting were published today, revealing an eight to one vote in favour of holding the base rate at five per cent.