/24-7PressRelease/ - LONDON, UK, March 21, 2008 - According to the analysts polled by Reuters ECONGB, the consumer prices are expected to have soared by 0.8% on the month, pushing up the inflation rate to 2.5%. If expectations of the poll are realised, the inflation is going to be the highest since May.
According to Philip Shaw at Investec, the main triggers could be the Gas tariffs and Electricity prices that rose by 13% and 9.5% respectively in February. Shaw said that the combined effect may add 0.35% to the inflation rate taking it above 2.5%. In the month of January, the consumer price inflation hit 2.2% and has been prevailing above the Bank of England's target rate of 2% since last October.
The Bank of England is walking a tight rope as, on the one hand, it is trying to boost the economy by cutting down the interest rates, and on the other hand, it is wary of cutting the interest rates too frequently because of the rising inflation rate. The credit crisis and its after-effects have led to increased cost of borrowing and scarcity of funds in the money markets. The secured loans and mortgages have become expensive as the lenders tighten their lending criteria.
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