“Today's 5.2 per cent annual CPI inflation is higher than expected, mainly due to rises in gas and electricity bills. While the figures are worrying, it seems very probable that today’s CPI figures signal the peak in the recent upsurge driven by food and energy costs.
“With oil prices well below recent peaks, and economic activity weakening, CPI inflation is set to slow sharply over the next year, probably falling below the 2 per cent target. The threat of recession remains higher in the short term than the risks of higher inflation.
“The MPC must continue cutting interest rates in order to consolidate the positive impact of the bank recapitalisation programme and last week’s internationally co-ordinated interest rate cut. We urge the MPC to cut rates to 4.25 per cent in November, and to bring rates down rates to at least 4 per cent in the following months."