Price rises fuel fears of higher interest rates

Price rises fuel fears of higher interest rates

City concern grew last night that mounting inflationary pressure will prompt the Bank of England to raise interest rates next week.

Despite a modest drop in the pace of manufacturing's output growth last month, a report from the Chartered Institute of Purchasing and Supply showed firms taking advantage of strong demand to pass on increases in costs to customers.

Howard Archer, Chief UK and European Economist for Global Insight, said: "This will heighten the Bank of England's concern that many companies are currently looking to raise their prices."

Mr Archer added that the price increases "boost the already very high likelihood that the Bank of England will lift interest rates by a further 25 basis points to 5% next week."

Although the survey picked up a slight fall in the Purchasing Managers' Index from 54.5 in September, last month's reading of 53.7 maintained the balance above the neutral [no-growth] mark of 50 for the fifteenth consecutive month. The report also showed a decrease in purchasing costs, partly as the result of the sharp fall in oil prices from the peak of almost $80 a barrel in the summer.

Roy Aycliffe, director of professional practice at CIPS, said: Purchasing managers saw a strong growth in the manufacturing sector in October, albeit at a more moderate rate than last month." Paul Dales, Economist for Capital Economics said the slight slowdown in industry's growth was the result of weaker domestic demand and.....continued below

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that exports had performed more strongly last month.

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