Inflation rises but rates still look set to be cut

People with first time buyer mortgages and other mortgage deals may benefit from further cuts to the base rate of interest.

That is what is suggested by the latest consumer price index (CPI) inflation figure, which rose in January.

CPI inflation increased to 2.2 per cent in the month, up on the 2.1 per cent figure recorded in December.

It is the highest figure recorded since June 2007, while the retail price index (RPI) rose to 4.1 per cent from four per cent.

Although the figures are strong, inflation did not pick up as quickly as many people had feared, potentially leading to further cuts to the base rate of interest.

"It will be some time yet before the MPC's inflation concerns evaporate," Jonathan Loynes from Capital Economics told the BBC.

The rising costs of fuel and food have been cited as the main reasons behind the increase in CPI and RPI inflation.

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