Inflation to get worse, says Bank

The Bank of England has warned that the inflationary situation is about to get worse, just a day after the latest official statistics showed that consumer prices index inflation has risen to three per cent.

Announcing the findings of the Bank's quarterly inflation report, governor Mervyn King warned that the situation had worsened since the previous report in February, with the challenge faced by the monetary policy committee (MPC) which he heads up of balancing the twin risks of lower growth and higher inflation becoming increasingly difficult, a statement which may indicate that there is a reduced likelihood of rate cuts in the near future.

He said: "For the time being at least the nice decade is behind us."

The report forecasted that energy and import prices will continue to push up inflation, although it stated that there was "substantial uncertainty" about its projections with a number of downside risks to inflation.

However, it noted, the perceived balance of risk had persuaded the MPC to hold rates this month.

Those keen on acquiring a home may consider self build in light of the possible reduction in the chances of mortgage rates falling, something that would make homebuying remain difficult to do for many.

Yesterday the Office for National Statistics said the surge in inflation had been mainly caused by higher fuel and food prices.


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