Interest rate rise warning; ANALYSIS: Inflation may affect borrowing costs - experts.
MIDLAND consumers were today warned of tough times ahead as inflation pushes up the cost of borrowing, with another interest rate rise likely.
Customers were put on High Street alert by business advisers BDO Stoy Hayward that the business sector was likely to pass on costs as the price of borrowing rises further.
The latest Business Trends report from BDO, which pulls together all the UK's main business surveys, reveals that the Inflation Index has risen dramatically to its highest level in over two years, increasing from 107.2 in February to 109.9 in March.
It says: "Business confidence has dipped in the month, with the Optimism Index falling slightly from 101.6 in February to 101.3 in March.
"Despite this slight decline, the Index still remains above the 100 mark. This indicates that the business community is still fairly confident about its prospects.
"While headline inflation is expected to decline in the next few months with energy costs having retreated from 2006 highs, the peak in the Inflation Index, indicates that core inflation, which excludes the prices of energy and food, will remain strong. This means that headline inflation is likely to rise again in the final quarter of 2 00 7 as energy prices cease to have a negative impact."
The report also provides backing for Mervyn King's concerns last week that another rate rise is likely in order to curb inflationary pressures - with the latest retail price inflation figures standing at 4.6 per cent, the highest level since 1991.
Kim Rayment, partner at BDO, said: "The recent data on inflation suggests that a further rate rise is highly likely.
"This will dent consumer spending power as borrowing costs rise, pushing up mortgage and other interest repayments."
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|Publication:||Birmingham Mail (England)|
|Date:||Apr 2, 2007|
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