The London Daily News

29 May, 2010 08:28 (GMT +00:00)

Cameron's hints at interest rates rise

- Interest rates likely to go up next year
- Fears of Capital Gains tax increase

City News Desk

The week that saw the prospect of Capital Gains tax hitting 40%, the Prime Minister of the coalition government, has said that inflation is at "alarming levels" and issued a hint that the Bank of England should increase interest rates as a remedy.

The rise of the Consumer Price Index to 3.7pc in April was in fact double the target set down by the Bank of England’s target of 2pc, with the Prime Minister saying:

"We have seen a slightly worrying increase in inflation in recent months so interest rates will be set to control to inflation".

The Bank of England is independent from the Government in setting interest rates, but the Governor Mervyn King will be according to the Daily Telegraph "wary of allowing prices to rise much further".

The OECD advised the British Government to increase interest rates to 3.5pc by the end of 2011, or face "public inflation expectations" could rise.

Critics of the fears of rising inflation have pointed out that the British economy has shrunk and there has been a "fiscal tightening".

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