Oil prices 'may derail UK recovery'

Fears over rising oil prices and increasing mortgage costs have led the Bank of England to declare that significant risks still remain to the UK's economic recovery.

Minutes released from the most recent Monetary Policy Committee showed that the nine-member group voted in favour of retaining its stock of quantitative easing at £325 billion, following the £50 billion increase last month.

The committee minutes said there was a "clear risk" that oil prices could push inflation higher than current predictions. Concerns over Iran's nuclear policy and subsequent disruption through the Straits of Hormuz drove oil prices as high as $125 a barrel recently.

Rising oil prices have also hit consumer's wallets, as the cost of filling up has increased. Extra expense at the pump has meant that savings oncar insurance premiums andbreakdown cover policies have became all the more important.

Another risk factor identified was the continuing uncertainty surrounding the eurozone debt crisis. The members warned that any contagion may cause economic activity to fall below its 2% target in the medium term. Similarly, members cautioned that rising mortgage costs may harm consumer confidence, as several lenders have increased rates in recent weeks in response to higher funding costs.

Copyright Press Association 2012