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Inflation fall may delay interest rate rise

A surprisingly low inflation figure for November announced yesterday could ease the pressure on the Bank of England's Monetary Policy Committee to raise interest rates soon.

Many analysts expected the Bank to raise rates again early in the New year, possibly February, after a seasonal pause but if the slowing inflation figure is supported by other growth indicators the MPC may delay the increase another month or two.

The Halifax said this week that they expected the base rate to be at 4.5% by the end of 2004 and Reuters reported yesterday that Markets were now pricing in interest rates of less than 4.75% a year from now, compared with previous expectations of 5.0 percent.

These predictions only give room for a few quarter-point raises from the current 3.75% rate for a whole year.

The consumer price index (CPI) fell 0.1% over the month to give an annual increase of 1.3%, down from October's 1.4% and lower than expectations of 1.5%

The November inflation figure is well below the Bank of England's new target of 2%.