Inflation news dents interest rate hopes

The consumer prices index (CPI) rate of inflation has reached three per cent, official figures have revealed.

Food and fuel costs were the main reason for the jump in the rate from 2.5 per cent in March.

With the rate now just 0.1 per cent below the level at which Bank of England governor Mervyn King would have to write an open letter to the chancellor explaining how the MPC would respond to the situation.

The last time this happened, in March 2007, the base rate was raised at the next possible opportunity (May), which could suggest that the chance of a cut in the June meeting is slim.

In turn this will prevent any reduction in mortgage rates, which could tempt some to look to self build a house rather than wait for a chance to buy one with a more reasonably priced mortgage.


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