Morning:
8°c
Bank urged not to raise interest rates despite surge in inflation to 3.5 per cent
Hugo Duncan16 Feb 2010
The Bank of England was today urged to leave interest rates at an all-time low despite a sudden surge in inflation.
Official figures showed inflation rose from 2.9 per cent in December to a 14-month high of 3.5 per cent in January after last month's rise in VAT. It stoked fears that the Bank will be forced to raise rates from 0.5 per cent to bring inflation back under control.
But the Bank expects inflation to fall sharply later this year and economists and business leaders warned a rise in rates would snuff out the fragile economic recovery.
David Kern, chief economist at the British Chambers of Commerce, said: “The British economy is still weak, businesses continue to experience numerous pressures, and it would be wrong for the Bank to contemplate a hike in interest rates at this time.”
Howard Archer, chief UK economist at financial analyst IHS Global Insight, said: “The Bank is going to keep interest rates down at 0.5 per cent for many months to come.”
Bank Governor Mervyn King said the rise in the Consumer Prices Index rate of inflation above the two per cent target “should be only temporary”.
Philip Shaw, UK economist at banking group Investec, said: “The message from the Bank is that it is in absolutely no hurry to raise rates.”
Today's figures also showed Retail Prices Index inflation, which includes housing costs, rose to 3.7 per cent in January, up from 2.4 per cent the previous month.
Reader views (1)
Inflation to keep down and drop below 3.5 ? who is kidding who ? What about future tax increases e.g:- Vat going up ? also Petrol and energy bills going up etc etc.
- Stan White, leeds, 17/02/2010 07:58
Report abuse
