Bank to publish inflation report

The Bank of England will today publish its quarterly inflation report and pundits say it will justify the Bank&#39s decision to hold interest rates at 4% by showing a rise in underlying inflation.

The Office for National Statistics has already said its key underlying inflation measure, which strips out mortgage repayments, rose 0.1% in October to an annual rate of 2.3% from 2.1% in September. The rise beat economists&#39 forecasts of an increase to 2.2%, but remained below the Bank of England&#39s 2.5% medium-term inflation target.

The ONS said its headline retail prices index grew by 2.1% year-on-year in October up from 1.7% the month before, boosted by rising costs in mortgage repayments prompted by exceptionally strong house price inflation.

The ONS report also revealed that service sector inflation is growing at 6% year-on-year – the strongest level for 10 years.