Further signs that inflationary pressures are building in the UK economy are emerging today with a 0.3% rise in the Consumer Prices Index (CPI).
Fuel costs will be the key driver in lifting the CPI higher after prices at the pumps rose by 3p a litre in May.
At the same time, petrol prices were returning to normal a year ago after falling back in the wake of the Iraq war.
Higher airfares are also expected to be behind a rise in the CPI to 1.5% in May from 1.2% a month earlier.
But downward pressure is likely to come from weaker prices of household goods and clothing.
Investec economist Philip Shaw said a rise to 1.5% could sway members of the Bank of England's monetary policy committee (MPC) towards another rise in interest rates.
"It may reinforce the MPC's belief that medium-term inflation pressures are building," he said.
Tuesday June 15, 2004
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