Bank raises spectre of rate increase

The Bank of England considered raising interest rates this month in a bid to control runaway inflation.

Minutes from the Bank's June meeting published today showed it discussed a rate rise as the cost of living soared.

Figures yesterday showed inflation at a 16-year high of 3.3 per cent and Bank governor Mervyn King warned it was likely to rise above four per cent this autumn.

The Bank's Monetary Policy Committee eventually voted to leave rates unchanged at five per cent but the fact it thought about a rise will send a shiver through Downing Street.

City economists said it meant rate cuts were unlikely for the foreseeable future, meaning there will be no respite for homeowners struggling with rising mortgage costs.

Howard Archer, chief UK economist at Global Insight, said: "The MPC minutes reinforce our belief that interest rates will not be coming down further any time soon. If the Bank of England does act in the near term it will be to raise interest rates."