No rate cut yet, say experts

A poll of experts carried out ahead of next week's meeting of the Bank of England's monetary policy committee (MPC) has unanimously agreed that there is likely to be no change to the base rate of interest, which currently stands at five per cent.

Carried out by Adfero, the survey found that inflationary pressures were the main reason for the prediction, with chief UK and European economist for Global Insight Howard Archer warning that consumer prices index (CPI) inflation is likely to increase from its present three per cent to nearly four per cent over the summer.

Any increase in the CPI rate to over three per cent will oblige Bank of England governor Mervyn King to write an open letter to chancellor of the Exchequer Alistair Darling to explain how the MPC would bring inflation back down again.

A shrinking prospect of rate cuts may in turn keep mortgage costs too high for many would-be homeowners to regard them as affordable, meaning alternative ways of obtaining a house such as self build may be considered.

Research by the Confederation of British Industry has revealed that retailers have just put up their prices by the highest average amount in the month of May since 1992, which may further fuel inflation.