FTSE on the rise

Investors held their nerve today after inflation hit 3.3% and Bank of England governor Mervyn King warned the figure could rise above 4%.

The City took heart from Mr King’s indications that interest rate rises to curb inflation were not set in stone and that the Bank’s rate setting committee had an open mind about the future direction for borrowing costs.

The FTSE 100 Index reached mid-morning 89 points higher at 5883.6, having started the session in positive territory. It made further progress after the release of Mr King’s letter to the British chancellor, which was a Bank requirement because inflation was now more than 1% above the British government’s 2% target.

Traders were also buoyed by forecasts for a healthy start to trading on Wall Street later today. That reflected hopes the US Federal Reserve will hold off from raising rates if inflation remains in line with expectations.

On a corporate front, Premier Inn and Costa Coffee owner Whitbread rose 4% as investors cheered the group’s first quarter figures.

The leisure firm’s like-for-like sales growth of 7.1% sent shares up 50p to 1272p, earning Whitbread a place near the top of the risers board.

An easing back of oil prices from yesterday’s near 140 US dollar a barrel mark helped boost trade, with banks and miners joining Whitbread in making gains.

Halifax Bank of Scotland rose 19.75p to 335.75p, a gain of 6% ahead of this week’s keenly awaited trading statement, while Barclays was up a further 6% or 19.5p to 348.5p after yesterday’s surge on news it is mulling a fundraising.

But housebuilders were in the red once more, with blue chip Persimmon down 6.5p at 414.5p while in the second tier beleaguered Barratt Developments was off 8p at 89.5p – reversing gains seen yesterday.