Inflation figures muddy rate outlook

Confusion has arisen once again over whether or not interest rates will rise again this year following the publication of inflation figures for July by the Office of National Statistics (ONS).

The ONS has said that the consumer price index stood at 1.9 per cent in July, a marked decrease on June's figure of 2.4 per cent.

The announcement surprised most analysts, who had been expecting a small drop that would keep inflation above the Bank of England's two per cent target.

With interest rates already at a six-year high, many observers now believe that the Monetary Policy Committee (MPC) will view the current rate cycle as having reached a peak.

"This is a massive surprise", commented Howard Archer of Global Insight.

"This will boost expectations that interest rates have peaked at 5.75 per cent," Mr Archer added.

However, others such as Jeremy Leaf at the Royal Institution of Chartered Surveyors said that they still believed a rise to six per cent was still on the cards.


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