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Inflation hits hope of a rate cut

The hope of many people that their home loans payments could be reduced by interest rate cuts by the Bank of England in coming months have been hit by financial data showing input prices are on the rise.

The Bank of England needs to balance the conflicting demands of stimulating growth and holding back inflation - rates are usually risen to keep inflation down and increased tos stimulate purchasing and growth.

However, rice of raw materials used by UK manufacturers spiked to an all-time high of 19.5 per cent in February, fuelling inflation.

The Office for National Statistics (ONS), said these input prices, driven by rising fuel and food costs, rose at their fastest pace since records began in 1986.

Inflation is the Bank's primary concern and if it rises above a certain level the governor of the Bank of England must explain why to parliament.

Howard Archer, chief UK and European economist at Global Insight, told the Times: "The producer price inflation data are not quite as awful as feared but are still pretty hard for the Bank of England to digest."

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