The MPC's gift comes wrapped with threat of looming headaches for the chancellor

A reduction in interest rates by the Bank of England should be a summer gift to borrowers.

- Phillip Inman

Yet the latest cut, from 4.25% to 4%, is laced with so many warnings that any celebration will be muted. Most prominently, the Bank's monetary policy committee (MPC) said in its latest assessment of the UK's economic outlook that inflation was on course to peak at a higher rate in the second half of this year than previously forecast. Price rises in food and energy and the higher cost of business services would push the consumer prices index to 4% in September, it said, before falling to an average of 3% in a year's time.