Lower than expected inflation figures have added weight to expectations that interest rate rises will remain on hold throughout most of 2019.

Consumer prices inflation stood at 1.9 per cent in March, figures revealed last week, unchanged from February's reading and below the Bank of England's 2 per cent target.

Low inflation combined and the Brexit extension are forecast to keep monetary policy steady, with rates held at 0.75 per cent. While unemployment is low and wages are rising, there are still concerns over Britain's consumer economy and business investment being stalled by continuing Brexit uncertainty.

CPI inflation and CPIH inflation (which includes housing costs) have fallen over the past year

Tom Stevenson, investment director at Fidelity, said: 'The unchanged consumer prices index at 1.9 per cent reflects a balance between higher petrol costs as the oil price rallies and lower clothing and footwear price rises.

'Restaurant and hotel prices and other recreation costs pushed prices higher while there was a sharp reduction in the upward contribution from food and alcohol compared with a year ago.

'The Bank is stuck on the horns of a Brexit dilemma. The strong jobs market illustrates the danger of leaving interest rates at today’s historically low level but the rest of the economy is clearly struggling with the ongoing uncertainty which only deepened with the latest Article 50 extension. Until there is more political clarity, the Bank will remain unable to begin its desired normalisation of monetary policy.'

The ONS showed the main contributors to March's inflation figure of 1.9%

Borrowers have been warned that even without a rise in the Bank of England base rate they may face higher costs, as lenders cut back on credit card deals and mortgage rate margins remain wafer thin.

A Bank of England report said that the spread between mortgage rates and money market funding costs represented by swap rates remained tight but could widen this year.

Kate Davies, executive director of the Intermediary Mortgage Lenders Association said: 'Consumers have been able to benefit from the market competition and the resulting reduction in mortgage spreads, particular on higher LTV products.

'But, as our recent New Normal report identified, with lenders having to hold more capital against mortgages as a result of the changes to the Basel regime, it may be that mortgage spreads cannot go much lower.

The Bank of England kept interest rates on hold at 0.75 per cent at its last meeting in late March and the next MPC decision is due on Thursday 2 May, when there will also be a quarterly Inflation Report, giving a deeper explanation of its latest forecasts.

In its last rates announcement, made on 21 March before Britain should have left the EU on March 29, the Bank reiterated its caution over Brexit.

It said: 'The economic outlook will continue to depend significantly on the nature and timing of EU withdrawal, in particular: the new trading arrangements between the European Union and the United Kingdom; whether the transition to them is abrupt or smooth; and how households, businesses and financial markets respond.'

How the Bank of England Inflation Report in February outlines rate rise expectations

Rate rise expectations have slipped back (solid line) since November's Inflation Report (dashed line)

The Bank of England's chart shows how sterling has tumbled since the run-up to the Brexit vote and result in June 2016

Households have become markedly less confident in the economy and their finances

In our recent interview with Mark Carney, he told Daily Mail business editor Ruth Sunderland that while the UK banking system is in good shape to cope with Brexit, there has already been a marked effect on the economy.

There has been a big fall in business investment, with firms delaying decisions to spend large sums on machinery or equipment.

The official figures show a drop of 3.7 per cent, but Carney said there is a much larger fall in comparison with where it would have been without the Brexit uncertainty.

He said: ‘It is down 20 per cent actually, relative to where it was going to be before the referendum. It is huge. And it has an effect ultimately on the productivity of those businesses, which means it has an effect on future employment and wages.'

One thing that has not been affected to a great degree by Brexit concerns or the recent rate rise, however, is mortgage rates. These remain near record low levels, despite a slight shift upwards after the rate rise to 0.75 per cent.

Mortgage rates have shifted upwards slightly but remain near record low levels

The August 2018 rate rise

Interest rates finally rose above 0.5 per cent almost a decade after the emergency cut to that level, in August.

Why does the Bank adjust interest rates? The Monetary Policy Committee's chief remit is to target inflation of 2 per cent, with interest rate rises used as a brake on the economy. Moving the base rate up feeds through to banks' pricing of loans to customers. By raising the cost of borrowing, an interest rate rise reduces demand and leads to banks creating less money when they issue loans. A lower level of money creation is seen as reducing inflationary pressures from wage rises and spending. With unemployment at record lows and slack in the economy dissipating, economists suggest inflation may overshoot without a rate rise. There is also an argument that the Bank should raise rates now while the going is good, to give itself wriggle room when a recession hits in future.

The Bank of England's MPC voted to raise rates to 0.75 per cent, casting aside worries over the consumer economy and a no-deal Brexit, as it said that low unemployment and reduced slack merited a hike to keep inflation on target.

The 9-0 vote was accompanied by a quarterly Inflation Report, which showed that despite today's hike the market outlook was for rates to go up more slowly over the next three years than previously expected.

No further move is expected until at least the middle of next year.

An indication of the Bank's confidence in the UK economy came with a statement on quantitative easing in the inflation report. It had previously suggested that its stock of UK government bonds purchased through this would not be unwound until rates hit 2 per cent, whereas now it said it expected to do this when interest rates hit 1.5 per cent.

That, however, remains a long way off with the Bank's expected path for rates showing base rate would not reach 1.5 per cent until 2021.

The November 2017 rate rise

The Bank of England finally raised interest rates in November 2017, more than a decade after the last upward move.

The rise to 0.5 per cent came as the Bank sought to dampen inflation, but is controversial as it could slow the economy.

The Inflation Report on the same day mapped out an expected path that with rates at 0.7 per cent at the end of next year, 1 per cent in 2019 and then sticking there through 2020.

The interest rate rise was widely expected and the Bank of England did little to dispel the belief that rates would go up. In fact, had rates not gone up, the bank would have lost credibility in many quarters.

HOW DO YOU FORECAST FUTURE INTEREST RATE RISES? We can't - no one can. But we look at overnight swap rates to work out roughly when money markets forecast the Bank Rate will start to rise from the rock-bottom level of 0.5 per cent. This is very far from a precise business - not only do financial traders make wrong predictions all the time, but swap rates are only a snapshot of their views at a given moment in time. The overnight swap rates move substantially. Take a look at the following chart, which appeared in the May 2013 Bank of England inflation report and illustrates interest rate projections in May compared with February. There is almost a two year gap between the outlook just a few months apart. Please note this chart is used to illustrate market movements and is not the up-to-date outlook for rates.

Like the Bank of England, we use the overnight index swaps curve to look at what the money markets are predicting for interest rates, and importantly how this is shifting. Economists also make predictions of when rates will go up, which are often quite different from those signalled by the money markets. We frequently quote their views here too if they help shed light on the issue for readers. You can then consider all the available information and make your own best guess on when interest rates will rise.

Swap rates and money markets vs mortgages and savings

When markets move a decent amount - and the move holds - it can affect the pricing of some mortgages and savings accounts.

When swaps price a rate rise to come sooner, fixed rate savings bonds tend to marginally improve in the weeks that follow. But it also puts pressure on lenders to withdraw the best fixed mortgages.

As for using swaps as a forecast, we've consistently warned on this round-up that they are extremely volatile and should be treated with caution - they should be used more as a guide of swinging sentiment rather than an actual prediction.

> Read the Council of Mortgage Lenders' guide to swap rates

Important note: Markets, economists and other experts haven't had a great record of making the right calls in recent years.

This is Money has always advocated caution with any sort of prediction (including our own!). There's no guarantee that those who have made correct calls in the past will make them in the future.

We'd also urge consumers not to gamble with their personal finances when it comes to predicting rate swings.

What decides rates?

The BoE's Monetary Policy Committee meets once a month and sets the bank rate. Its government-set task is to keep inflation to a 2% target (and nowadays also maintain financial stability). So if inflation looks likely to pick up, it raises rates.