Will shock inflation news be enough to stop another rate rise?

The monetary policy committee of the Bank of England meets today - and will it approve a 15th successive base rate rise?

Yesterday there was an unexpected boost to hopes that the Bank might ‘stick’ when slowing food prices helped drive a surprise fall in inflation in August, with the cost of living now at its lowest level in a year and a half.

Inflation fell to 6.7 per cent in the year to August, down from 6.8 per cent in July - the third month in a row that the figure has dropped.

August's figure was a surprise as many economists had expected the figure to increase due to rising fuel prices.

Chancellor Jeremy Hunt says the news showed "the plan to deal with inflation is working".

"But it is still too high which is why it is all the more important to stick to our plan to halve it so we can ease the pressure on families and businesses. It is also the only path to sustainably higher growth."

Rightmove’s mortgage expert Matt Smith says:  “While markets predict and have priced in a 0.25 per cent rise, which is still the most likely outcome, the inflation news means further rises beyond this are now a lot less likely. 

“This news is against a backdrop of falling mortgage rates, that have now dropped for an 8th consecutive week. The pace of rate reductions accelerated last week as anticipated, as lenders responded to swap rate reductions with rate cuts and intensifying competition.

“Confidence will continue to increase amongst lenders in the coming weeks with the trajectory of rates remaining downward.”

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