The jump in CPI inflation from 2.5% to 3.0% in April has taken further near-term interest rate cuts off the agenda. Indeed, the MPC is unlikely to want to cut rates while inflation is above 3% and rising towards 4%, as it is likely to do as higher petrol and utility prices rise further.But the consequence of higher interest rates in the near-term will be a more markeddownturn in activity and much lower interest rates further ahead. We still expect interest rates to eventually be cut to around 3.5%.
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