The rise puts the countries inflation rate significantly higher than the governments 2% target and will certainly steer the Bank of England away from further rate cuts in the near future.

The UK’s central bank has said that inflation may increase above 4% in 2008, doubling the governments target, however as worries over the economies growth continue to grow the Bank of England is left with a tricky balancing acts.

The Bank of England can’t cut rates until it is convinced inflation is moving downwards,” said James Knightley, economist at ING.

Often used as a benchmark for pay negotiations, the RPI inflation measure rose from 4.3% in May to 4.6% in June.

Chancellor Alistair Downing has called for wage restraint in order to help rein in price growth.

“We saw what happened in the past when inflation got out of control and people found that every penny they got in a wage increase was swallowed up by food and fuel prices going up,” said Mr Darling.

He went on to say “Whether you are in the private sector, or public sector, whether you are sitting in the board room or working on the shop floor, we cannot allow inflationary wage increases because that would mean that everyone, especially people on lower incomes, would suffer,”

The biggest contributors to fuelling price inflation were the prices of non-alcoholic drinks and food, with prices increasing at a record pace of 9.5% in June from the same time last year. These figures were up 2.1% from May.

Increasing oil prices have also helped to drive up the cost of fuel with the average price of petrol increasing by 5.3 pence a litre.

The report, compiled by the RAC says that since 1988 the cost of motoring in real terms has fallen by as much as 18% thanks to cheaper cars and better build quality, meaning fewer repairs are required on them.

Out of the 1,116 people who were surveyed, 60% believed the rising cost of motoring to be the biggest change in motoring over the last twenty years.

The report compiled was the RAC’s twentieth, which also reflected the growing menace of road rage as roads have become more congested and driven angrier as a result.

Over 30% of those surveyed as part of the report said that they had been a victim of road rage to the extend where they felt physically threatened, with half admitting swearing or gesturing in the other direction.

“It is worrying that millions of motorists are victims of a driving behaviour [road rage] that didn’t even have a name 20 years ago.” - RAC motoring strategist Adrian Tink

“This worrying behaviour becomes downright dangerous when you consider they are behind the wheel of a tonne-and-a-half of metal.” - RAC motoring strategist Adrian Tink

Other conclusions the report drew include:

1. Some 92% believe we are more reliant on our cars than in 1988
2. Of all households, 75% have a car, while seven out of 10 British adults carry a licence
3. The number of households with a car has gone from 14m in 1988 to 19.5m - an increase of 39%
4. Local speed limits of 30mph are accepted by 66% of drivers, but over half want to see motorway limits raised from 70mph to 80mph
5. The number of women drivers on UK roads has gone from 10.2m to 15.3m

Rising food and fuel costs resulted in the European Central Bank raising its interest rate, a move which is thought could further weaken the dollar which is currently at a two month low, and lead to further increases in the trading price of oil.

In anticipation of the ECB’s rate increase, oil hit new record highs today, with Brent crude topping $146 a barrel for the first time.

The interest rate increase comes amid concerns that the eurozone economy is slowing and there are further concerns that rate hikes could slow the economy further.

“Today’s ECB interest rate hike underlines the bank’s determination to bring inflation down, even amid plain evidence of slowing gross domestic product growth” - Jennifer McKeown from Capital Economics.

Within the eurozone it was Spain who announced figures that suggested it is heading for recession with it service sector showing significant signs of retraction.

Other leading banks have also warned that It also signalled that more interest rate rises could be on their way if world oil and food prices continued to rise.

On the London exchange Brent crude hit $142.13 a barrel and in New York light crude climbed to $142.26.

The cartel of oil producing nations OPEC has found itself under increasing pressure to raise production quotas which would ease concern and help bring prices below current levels, however the cartel seems to be split as to the whether it should raise output.

Saudi Arabia recently invited senior members from oil producing countries to discuss what to do about oil. It seems the case that many OPEC members, and senior figures in other oil producing nations, still have clear memories of the crash in oil prices a decade ago after the Asian financial crisis which lead to oil plummeting to $10.

It is these memories know as the “ghost of Jakarta” that apparently explains the reluctance of OPEC members to increase output in order to artificially lower prices.

Raising further concerns within the industry, Libya has recently threatened to cut production saying that the market is well supplied. This statement is thought to be in response to threats from the US against oil producing nations.

In the US the House of Representatives recently passed a bill allowing the Justice Department to sue OPEC members for restricting supplies and setting prices. The bill has not been voted on by the senate and the white house has already threatened to veto the bill.

Oil prices have continually been pushed higher recently by the combination of a weak dollar and concerns about volatile geopolitical situations that could disrupt supply.

Many analysts are now predicting the upward trend to continue, with Tom Pawlicki, an analyst with MF Global in Chicago stating:

“I think the up trend is going to continue, we could move up toward $150 over the next few weeks.”

Anglo American mines precious metals, diamonds, base metals, coal and industrial minerals from mines across the world.

The recent decision to invest hundreds of millions of pounds in the Unki platinum mine in central Zimbabwe has however been revoked after it was met with heavy criticism by political opponents of Robert Mugabe who said that proposed operations would only support his regime.

After being intensely scrutinised by the media and pressured from politicians and shareholders, Anglo American has now said that it will review the project, but went on to say it would not abandon the 650 employees at the mine.

Originally Anglo had said of the proposed plans “The responsible development of the Unki mine will create a long-term viable business which will be important to the economic future of Zimbabwe for years to come,”

A company statement now said that “The company is monitoring the situation in Zimbabwe very closely and is reviewing all options surrounding the development of the project.”

Anglo has now been told by the Mugabe regime that if the proposed plans did not go ahead then the Mugabe administration would take control of it.

In addition to the companies review of it operations in Zimbabwe, Anglo American is also to be investigated by the foreign office to ensure that the investment made in the project did not breech imposed sanctions.

Prior to the announcement to review operations in the country, Anglo had bucked the trend of British businesses based in the region that have been closing down operations or suspending them until Mugabe is out of power.

Shares in Anglo American fell 3.2% to £33.14 during afternoon trading, with rival miner Rio Tinto also down 2.9%.

The announcement on profits was made after warnings that tough trading in its investment banking division Barclays Capital would cut group profits.

I reaction to similar news other banks including Royal Bank of Scotland, HBOS and Bradford and Bingley have asked shareholder to for extra cash in order to repaid the credit losses. Barclays on the other hand have not asked for any additional funds from shareholders.

“It [Barclays] maintains that it will continue to monitor all options and will clearly not be drawn on speculation as to what form this capital injection might take.” - Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers,

It was reported yesterday that Europe’s biggest bank announced that it had written off £1.6bn in debt provisions for losses against mortgages, credit cards and other loans to U.S. consumers.

The write offs were lower than those in the last quarter of 2007 and were in line with predictions, however many the lower write off could have been due to seasonal factors such as tax refunds being used to repay debt rather than any underlying improvement.

“I don’t see [US] real estate prices changing from where they are now until well into 2009… We don’t think it is a spring 2008 event; we think it is a 2009 event.” - Michael Geoghegan, HSBC’s chief executive

With these latest write offs HSBC took its amount of write downs to £7.5bn over the past year, standing forth in terms of the largest write down figures behind Citibank, UBS and Merrill Lynch.

At the same time it was announced that a further $2.6bn was being written off in the company’s banking arm.

It has long been the case throughout the sub-prime mortgage crash that a strong Asian arm has helped to counter the hit taken on US home loans, meaning resulting profits were still higher than this time last year.

“I am encouraged by the way we have increased pre-tax profits in every one of the major countries in which we operate in Asia-Pacific, the Middle East and Latin America,” - Michael Geoghegan, HSBC’s chief executive

After a two day meeting the Monetary Policy Committee made its decision today which followed last months rate cut from 5.25%.

“The latest data shows the economy is slowing, albeit only gradually, and at the same time inflationary pressures continue to mount,” - Ian McCafferty, chief economic adviser to the CBI business group.

This afternoon’s move is another step in the measured response that the BOE has shown since the credit crunch hit last year. Unlike the FED the BOE has steadily reduced rates remaining reluctant to make successive cuts. The FED on the other hand has continued to slash its base rate in response to the crisis.

More base rate cuts are however expected in order to prevent the UK economy from slipping into recession. The British Chambers of Commerce had said prior to the decision to hold rates that a cut would have underpinned confidence in both businesses and consumers, helping limit any potential damage the crunch would have on the economy.

“This decision was a mistake given the serious threats to economic growth,” - BCC adviser David Kern.

Roger Bootle, economic adviser to Deloitte second those thought saying that by holding interest rates the MPC risked “presiding over the deepest and longest economic downturn since the recession of the early 1990s”.

Figure released this week showed that:

• Manufacturing output fell by 0.5% in March, the sharpest rate of decline in six months.
• The UK services sector grew at its slowest rate in nearly five years in April.
• Consumer Prices Index inflation was 2.5% in March, above the target 2%.
• April food prices were up 4.7% compared with a year ago.

Possible rate cuts later this year are possible as the Euro economy continues to slow.

The ECB has held interest rates at 4% since the credit crunch began, a move that contrasts with that of the FED who have slashed interest rates from 5.25% to 2% since summer 2007.

As a result of ECB moves the Euro is at a record high against the Greenback making Euro exports expensive.

As fears of inflation throughout the EuroZone are quelled the ECB is expected to cut interest rates, and as consumer confidence returns to US markets the Greenback is expected to start to peg back the Dollar.