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UK Interest Rates Forecasts and Predictions for Home and Property in the UK at 25April 2008

UK Interest Rate: 5.00%

UK Interest Rates Forecast: Possible cut to 4.75% in June

Inflation Remains Unchanged at 2.5%

The government's preferred CPI measure of inflation remained unchanged at 2.5% this month, against an expected rise to 2.6%.

The lower than expected figure sparked new hopes that the Bank of England might cut interest rates further, but it should be remembered that when the Bank's Monetary Policy Committee made the decision to cut rates to 5%, they would already have had access to these inflation figures.

In other words, the chances are that this lower than expected inflation rate was a factor in this month's interest rate cut to 5%.

Manufacturers' Costs Reach Record High

Manufacturers' costs - the costs of fuel, raw materials and other commodities - reached record highs this month, with costs an average of 20.4% higher than this time last year.

Much of the increase can be traced back to the high cost of oil - the cost of fuel and many other raw materials such as plastics is linked to crude oil prices.

Higher input costs mean higher output costs, and factory gate inflation - the price of finished goods - reached a 17-year high of 6.2%, according to figures from the Office of National Statistics. Retailers with tight margins will struggle not to pass these increased costs onto consumers - with the result that upwards pressure on inflation is unlikely to cease anytime soon.

This in turn means that further interest rate cuts could be difficult for the Bank of England to justify, trying as they are to tread a line between crippled credit markets (demanding cheaper credit) and rising prices (requiring a reduction in cheap credit to combat).

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Please note, this information is NOT necessarily RELEVANT in Scotland


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