FRESH signs of falling house prices combined with surging factory prices to heighten the dilemma for the Bank of England over interest rate moves.
House prices fell last month for the sixth month in a row but at the slowest pace for four months, according to a survey by the Royal Institution of Chartered Surveyors.
The study found a balance of 37 per cent more surveyors reported a fall in house prices than a rise last month, down from December’s reading of 50 per cent but still suggesting a drop. Falling house prices have prompted some commentators to warn the Bank that consumer activity may wane, necessitating a cut in interest rates.
But in a sign of inflation elsewhere in the economy, input prices, the cost of raw materials for factories, rose 3.4 per cent last month, caused mainly by a 14.8 per cent jump in crude oil prices. It was the biggest rise in four and a half years.
Core output prices also rose, by 0.3 per cent over the month.
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Analysts are now forecasting that in its Inflation Report, published tomorrow, the Bank may suggest that the risk of inflation is increasing. That would indicate that interest rates could rise this year.