The Bank of England's latest inflation report has hinted at the possibility of a further rise in the base interest rate in order to keep inflation under control.
In the report, published this morning, the Bank says the view of the Monetary Policy Committee is inflation will continue to rise above market expectations before falling back to the target of 2%, but only as a result of the rise in the base interest rate last week.
And Mervyn King, governor of the BoE, says the MPC, remains "committed to take whatever action is necessary in future".
The report predicts inflation may stay at its current level or even rise over the next couple of months, as higher energy prices and university tuition fees bite, before dropping back as energy and import price pressures fall away.
The Bank suggests had the MPC not taken the decision to raise the interest rate inflation would have gone unchecked with the report arguing the risks of increasing inflation come from world economic activity and the UK’s net trade position in the world market as a result, the outlook for energy and import prices, the strength and longevity of the recovery in consumer spending and the amount of spare capacity both within firms and the labour market.
As for the housing market, the Bank says the picture appears to be mixed with survey figures generally showing a robust market and the number of mortgage approvals seeming to pick up in May and June.
Although it also cites recent housing market surveys by both Nationwide and Halifax which showed house price inflation had eased.
The report suggests increases in interest rates may have a dampening affect on the housing market but that so far any affect has been limited.
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