Interest rates 'still tipped to increase'

Interest rates are still more likely to rise than fall, despite the zero main inflation rate, according to a Bank of England official.

Minouche Shafik, deputy governor, said that underlying core inflation remains not overly low, despite last month's Consumer Prices Index (CPI) figure.

She was the first rate-setting official to comment on the subject since the CPI inflation measure dipped to zero.

Ms Shafik said that inflation remains under the Bank's two per cent target level.

But she added that this disguises the fact that the reasons behind the current rate are largely external and should be short-lived.

Ms Shafik's remarks to Kent Business seem to contradict those spoken last week by her Bank colleague, Andrew Haldane.

The chief economist said that it was 50/50 whether interest rates would next go down or up, after the drop in inflation had been similar to "a stone".

Copyright Press Association 2015