Inflation to keep on rising, says King

The prospect of interest rates falling in the near future may have been dealt a further blow this week as Bank of England governor Mervyn King told members of Parliament that the rate of consumer prices index (CPI) inflation is likely to go on rising.

Already above the permitted one per cent variation beyond its target rate at 3.3 per cent, Mr King said CPI is likely to go on rising over the coming months.

He told the Treasury select committee that soaring oil, gas and food prices were likely to push inflation above four per cent this year.

Such a situation could prevent mortgage rates being reduced.

Mr King said the monetary policy committee faces a "balancing act" when planning its approach to ensure there is a sufficiently pronounced slowdown in the economy to bring down the CPI rate, which could mean keeping a tight reign on interest rates to prevent inflationary growth taking root.

The next CPI figures will be published by the Office for National Statistics on July 15th.