The chances of another Base Rate cut next month shrank on the news that the Consumer Price Index jumped to 3% rather than the expected 2.8%.

Treasury Minister James Murray (pictured) conceded that the road to the Bank of England’s 2.0% inflation target would now be ‘bumpy’.

The rise has been blamed on the rising cost of meat, bread and cereals and higher private school fees.

City investors have now reduced the probability of a March interest rate cut from 24% to 15%. They are still, though, anticipating two more rate reductions this year.

INDUSTRY REACTION

Today’s news may throw many questions into the mix for homebuyers.”

Nathan Emerson, CEO of Propertymark, comments: “A slight rise in inflation had been widely speculated, especially with the Bank of England predicting inflation to increase to around 2.8% by the third quarter of 2025, before easing back downwards again.

“Today’s news may throw many questions into the mix for homebuyers and sellers as they look to make their first or next move, especially given that interest rates have recently started to ease.

“However, it remains positive that mortgage borrowing currently remains lower compared to only twelve months ago, and new and improved mortgage products are continuing to enter the marketplace.”

We have to be realistic and acknowledge that inflation is likely to remain persistent.”

John Phillips, CEO of Just Mortgages and Spicerhaart said, “We have to be realistic and acknowledge that inflation is likely to remain a persistent challenge this year, particularly with geopolitical tensions escalating, higher energy prices later in the year and as we see the full effects of government policy, such as the national insurance hike.

“We also have the elephant in the room and the upcoming Spring Statement at the end of March.

“All along though, the central bank has maintained that it will push forward with multiple base rate cuts this year, as it balances sticky inflation with an economy showing minimal growth. Whether today’s bigger rise in inflation changes that trajectory is yet to be seen.

Phillips adds: “Customers have responded well to positive changes in the market with the base rate cut and both pre-emptive and subsequent cuts from lenders.

“While it is important to keep inflation under control, our hope is we do see further base rate cuts this year to maintain this positive momentum and allow the housing market to play its important role in driving economic growth.”