Rate cut ‘could worsen inflation’

Posted 2008-01-29

Inflation could be enflamed by the Bank of England’s decision to cut interest rates, a price comparison website says.
Fool.co.uk said while the decision to lower the cost of borrowing by to 5.25 per cent was ‘not unexpected’, it could make inflation worse in a time of soaring energy bills and oil prices.
The site says the Bank’s monetary policy committee seems ready to forgo the need to head-off inflation to try and avert a recession.David Kuo, head of personal finance at Fool.co.uk, said: “However, consumers should be aware of the damaging effects of inflation even if the Bank of England chooses to ignore it for now. In order to beat rising prices, we need to ensure any savings we have will guarantee a better return.”

Meanwhile, the Bank predicts demand for secured loans will rise in the first quarter of the year as other credit avenues close off.

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