Inflation at 11-year high

16 January 2007

Homeowners are being warned that their mortgages could go up again.  It’s all because inflation has jumped to an 11-year high, raising the prospect of yet more interest rate rises.

Official figures show that higher fuel costs helped to push the Consumer Prices Index (the Government’s preferred way of measuring inflation) up to 2.7% in December.  Analysts had expected bad news about inflation, after the Bank’s shock rise in interest rates last week – but this rise is larger than they’d forecast.

Economist Howard Archer said: “Now we know why the Bank of England raised interest rates last week.  This is a pretty unhealthy report all round for the Bank of England to digest, fully justifying the immediate hike in interest rates.”

Many market commentators say there’s now a strong chance of a further 0.25% interest rate rise in the next two months – and possibly as early as next month.