EXPERTS have forecast more interest rate rises, despite a fall in inflation.

Further rate rises are expected, even though official figures showed the Consumer Price Index falling by 0.2 to 1.4 per cent last month.

Falling petrol, seasonal food and household goods prices caused the decline as retailers sought to attract shoppers with discounts following last week's 0.25 per cent interest rate rise to 4.75 per cent.

But analysts said they still expected prices to recover in the medium-term, creating pressure for further rate rises.

Philip Shaw, of stockbroker Investec, said today's Inflation Report from the Bank of England was likely to give details of the medium-term outlook for prices.

"We expect to see continued concern about inflation, pointing to further rate rises ahead," he said.

Andrij Halushka, of the Centre for Economics and Business Research, said he expected rates to remain unchanged next month.

Richard Ratner, retail analyst at brokerage Seymour Pierce, said: "We look for further rate rises, at the latest, in October."

The Office for National Statistics (ONS) said the UK's trade deficit in goods and services was provisionally estimated to have worsened in June to £3.8bn, from a deficit of £3.6bn in May.

On goods alone, the deficit was estimated to have climbed to £5bn compared with a deficit of £4.8bn in May.

John Butler, of HSBC bank, said the worsening trade deficit was likely to be of more concern to the Bank of England's rate-setting panel, the monetary policy committee (MPC), than the fall in inflation, with exports improving but imports remaining high and the deficit continuing to deteriorate.

"The stronger imports are likely to contain more news for the MPC than the weaker inflation and hence, on balance, today's number should be, as strange as it may seem, broadly hawkish for rates," he said.