A further rise in UK interest rates is possible this year if the risks of inflation remain on the upside, according to Abbey International.
Despite a fall in Consumer Price Inflation to less than 2%, the Treasury’s inflation target, the short-term economic outlook is uncertain and season pressures could still cause inflation to rise, according to Anthony Haynes, managing director of Abbey International.
“The danger from inflation is still there, as evidenced by the fact that other measures of inflation, such as the Retail Price Index, are still at high levels”, says Haynes.
According to Haynes, the Bank of England’s official inflation report, scheduled for release on 14 November, will indicate how future pressures on inflation are perceived.
“A strong economy will suggest a continued upwards pressure on inflation, whereas a slowing of economic activity, accompanied by further falls in the rate of headline inflation, will suggest the need for further rises may be receding”, he adds.
Economic unknowns, many of which have been caused by recent turbulence in world markets, are confusing interest rate and inflation trends and Haynes says more hard data on the economy is needed before speculating on future base rate rises.
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