The surge is set to push inflation up. To stop that running out of control, the Bank of England might have to put rates up – and that would hammer households with variable rate mortgages.
An increase of just 0.25% in the Bank’s base rate would add £20 a month to an average £150,000 mortgage. Unleaded and diesel prices are on the brink of record highs, hitting families and businesses alike. With budgets already under strain, the Mirror yesterday launched its Will the Penny Drop? campaign to urge Chancellor George Osborne to scrap April’s planned 1p fuel duty hike.
The increase in pump prices follows a leap in the cost of crude oil – with a knock-on effect for the price of everything from plastic to food and other goods transported to stores.
Official figures yesterday revealed the cost of goods leaving factories rose 4.2% last month.Howard Archer, chief UK and European economist at analysts IHS Global Insight, said: “The producer price data will do little for the Bank of England’s peace of mind.
“It shows mounting inflationary pressures in the supply chain, adding to the Bank’s problems and increasing pressure for an interest rate hike sooner rather than later.
“While our central forecast remains for the Bank to hold off from raising interest rates until the fourth quarter, given likely markedly slower growth over the coming months as the fiscal squeeze increasingly bites, the risk of a move before then is mounting.”
Samuel Tombs, UK economist at consultancy Capital Economics, said the surge in producer prices would not hit inflation until 2012.
But he added the figures would spark calls by some for the Bank’s Monetary Policy Committee to put interest rates up immediately. For the latest updates PRESS CTR + D or visit Stock Market news Today
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