16 Sep

Inflation 'near peak'

Inflation 'near peak'

Inflation is close to its peak and may be expected to fall soon, it has been suggested.

The Office for National Statistics (ONS) revealed today that the consumer prices index (CPI) rate had risen from 4.4 per cent in July to 4.7 per cent in August.

Further increases in food and domestic energy inflation have pushed up the rate, although falling oil prices are starting to bring down the cost of petrol.

As it was the fourth month in a row that CPI had exceeded its permitted ceiling of three per cent, Bank of England governor Mervyn King has had to write another explanatory letter to the chancellor Alistair Darling outlining why this is and what the monetary policy committee (MPC) will do about it.

While making no commitment to action by the MPC, he forecast that inflation will "soon" peak at around five per cent and is likely to fall rapidly in 2009.

Such a situation could help the MPC to make several base rate cuts, lowering the cost of mortgages as a result.

This scenario was predicted by Richard Hunter, a stockbroker at Hargreaves Lansdown, who told the BBC the latest CPI figure may be an "indication" that the peak is near and permit a "loosening" of monetary policy soon.

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