Bank of England to keep interest rates on hold

Inflation nudged up to 1.2 per cent in October but is unlikely to provoke a change in interest rates.

11:56 17 November 2004

Inflation nudged up to 1.2 per cent in October but is unlikely to provoke a change in interest rates.

The Office of National Statistics noted a two pence increase in petrol, to a four-year high of 85 pence a litre, accounts for 80 per cent of the inflationary jump.

Analysts across the board, however, do not see this as having any likely influence on the Bank of England, which is predicted to maintain the interest rate at 4.75 per cent.

John Butler of HSBC told The Times: "Despite the rise, inflation remains incredibly low, with UK inflation lower than almost all other EU economies."

Melanie Baker of Morgan Stanley, added: "Inflation remains significantly below target in the UK and we continue to think that, on balance, interest rates are likely to remain on hold through 2005."

The Bank of England's interest-rate-setting Monetary Policy Committee determines whether to lower or raise the base rate of borrowing in the UK with the aim of controlling inflation.

Last month it voted unanimously to hold interest rates at 4.75 per cent.