What next for interest rates?

With inflation running at 4.4%, more than twice the government's stated target of 2% requiring Mervyn King to write to the Chancellor once again, the odds on an interest rate increase in the short term would appear to have fallen drastically. However, some recent data suggests that the favourite month for a rate rise May, may well come too soon as far as some analysts are concerned. Trading results from Mothercare, Laura Ashley and Dixons suggest that conditions on the high street are not yet that favourable and the consumer confidence index level has slipped to its lowest level since may 2004. Add to that the increase in the number of mortgage defaults seen during the first three months of the year and it could be that any further squeeze on consumption expenditure and mortgage intrest payments could scupper the chances of an economic recovery.