Oil price rise will heat up monthly interest rate meeting
Oil prices have hit an all-time high in sterling terms following a cocktail of supply pressures across Africa and the Middle East, adding to the turmoil facing the Bank of England's policymakers as they meet tomorrow.
The impact of the weaker pound, which declined 17% in value in the past two years, means the sterling value of Brent crude oil has risen to a record high of £74.60 per barrel.
But at $121 a barrel, Brent crude is still below the $147 (£90) a barrel record set in the summer of 2008.
The surge in oil prices, triggered by unrest in Libya, a lack of supply co-operation in Iran and strikes in west Africa, is likely to be passed on at UK petrol pumps and add further pressure to already-squeezed disposable incomes.
The surge will provide another headache for policymakers at the Bank of England at their monthly meeting tomorrow to set the interest rate as they battle rising inflation, which hit 4.4% in February, and sluggish growth.
However, following the shock decline in GDP in the final quarter of 2010, rate-setters are likely to hold fire for the time being as they wait to see how the economy has fared in the early part of this year.
Chief economist at the Northern Bank, Angela McGowan, said: "Anything other than unchanged interest rates and an unchanged asset purchase target when the Bank of England meets on Thursday will be a massive surprise to markets.
"Data has in general been fair but most agree that no game changers have occurred over the past month that should trigger a change in rates."