Inflation rockets and hopes of rate cut plummet

According to a recent report the hopes of any further interest rate cuts for this year have plummeted, as reports show that inflation for July came in at a record 4.4%, which was a big jump from the 3.8% for the previous month and is the highest level since records began in 1997.

The base rate has been on hold since the last cut in April of this year, with MPC members struggling to balance the slowing economy with rising inflation levels. In July one member of the MPC wanted to increase the base rate as a result of rising inflation levels, and many are concerned that with inflation now so high more members may vote this way.

Whilst rising food and oil prices have been blamed for rocketing inflation, one leading economist said that is was not all down to food and oil. He said: ‘Worryingly, core inflation spiked up to 1.9% in July from 1.6% in June, which raises concern that higher energy and food prices are increasingly having second-round inflationary effects. ‘

He added: ‘Inflation is set to go significantly higher still over the coming months, despite the recent retreat in oil prices. Indeed, it could well reach 5.0% in October. The spike increases the risk that the Bank of England will raise interest rates.’