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The annual rate of inflation rose to 3.1% in March and is now more then 1% higher than the government target of 2% for the Consumer Prices Index (CPI). The Retail Prices Index (RPI), which includes housing costs, was 4.8% in March. This was up from 4.6% in February.
The 25% rise in oil prices since February have caused increases in petrol prices. According to the Bank of England this is one reason for the sharp rise in inflation. Also there was a reduction in the cost of some food items in March last year, which was not repeated this year, and many retailers have increased the cost of furniture and furnishings.
After these latest figures many experts now predict a further rise in the UK interest rate next month. The Bank of England Monetary Policy Committee held the interest rate at 5.25% in April, but it is likely to be increased to 5.5% or even more, when they next meet in May.
The possibility of further interest rate rises is starting to affect mortgage deals on offer. Fixed rate deals have already been removed by some major lenders and others are likely to be withdrawn shortly.
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