Inflation now at 5.2%

Inflation figures due out today show a rise to 5.2% on the back of rising prices of gas and electricity.

Soaring food prices and the cost of filling up the family car have contributed to the rise in inflation over the past year although there are signs both that with the fall in oil prices and easing of food prices - for the first time since March 08 - that this represents the peak.

The worsening world economy will undoubtedly bring downward pressure on inflation in the next 12 months which is why the Bank of England, despite being tasked with keeping inflation low, felt able to reduce interest rates last week by 0.5%. In fact, I would expect to see further reductions over the next six months.

Commentators are suggesting that we could see interest rates even as low as 2.0% as the Bank desperately tries to offset the effects of a deep recession, although this would be an error, and would simply stoke up inflationary pressures in the future.

Traditionally, low interest rates allow mortgage holders to spend less of their money servicing debt and facilitates the availability of credit for businesses to expand and invest. However, it is uncertain how much reducing the headline bank rate is feeding through positively into the general economy. Many of the big lenders have not yet reduced their rates, and the general mortgage market is not as competitive as it was even just 12 months ago.