Bank to increase interest rates

New data looks set to trigger an increase in the cost of borrowing in the UK, increasing the cost of mortgages.

13:26 12 October 2004

Data released today reflected a change in fortunes in August and September, prompting suggestions that the Bank of England would be forced to raise interest rates further in November to counter inflationary pressure.

An accumulation of statistics on consumer spending, high street costs, house prices and the trade deficit, pointed to an oncoming period of inflation.

A key tactic to curb rising prices is to deter spending and encourage saving by boosting the interest rate, a method already tried five times in the last year, leaving the rate at a three-year high of 4.75 per cent.

The Bank's intentions have been undermined by a steely determination among UK consumers to continue shopping.

Helen Dickinson from the British Retail Consortium was reported as noting that "the resilience of the UK consumer is quite remarkable".

Some analysts warn that simply raising interest rates may have little effect as inflation is likely to be pushed by rising oil prices, while an increase might also unduly harm those in debt and principally the loan-based housing market.