Inflation figures may not prevent rate rise, says IoD

Interest rates could still rise next month despite the latest inflation figures, the Institute of Directors (IoD), said today. Headline inflation figures show the new CPI measure at 1.3% in December, unchanged from November. However, a more detailed analysis of the contrasting inflation performance between the goods and services sectors, and between month-on-month and year-on-year measures, suggests rates could still go up in February, the IoD said.

Graeme Leach, Chief Economist at the Institute of Directors, said:

"On the face of it inflation appears stable. However, today's figures reveal an imbalance between goods and services. While inflation in goods remained flat, the 0.7% (month-on-month) rise in the service sector is a cause of concern. The Bank of England may have little choice but to raise interest rates to keep service sector inflation under control."

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20.1.04 No.227

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