21 Apr

Inflation back inside target range

Inflation back inside target range

The possibility that interest rates may have to be raised to combat a fresh spurt in inflation may have diminished after the latest official figures showed a fall in the consumer prices index (CPI) rate.

CPI inflation for March dropped from 3.2 per cent to 2.9 per cent, bringing the level within the one per centage point permitted variation from the two per cent target the Monetary Policy Committee (MPC) is charged with aiming for.

Food and drink, transport costs and the cost of food were all factors, as prices for these had moderated over the past year.

With inflation falling again after February's jump - the first since September 2008 - the situation may enable the MPC to maintain the record low base rate level for some time to come, keeping mortgage costs down as a result.

In his open letter to the chancellor following the jump in CPI above three per cent last month, Bank of England governor Mervyn King stated that he believed the downward trend in inflation was "likely to resume in the coming months".

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