Inflation up at 2.5 per cent

Inflation rises 0.5 per cent above target

Tuesday, 18, Mar 2008 12:00

Inflation has continued to rise above the government's target and is now at its highest level for nine months.

The Office for National Statistics places the consumer price index measure of inflation at 2.5 per cent, after rising from 2.2 per cent in January.

This has been driven largely by rising gas and electricity prices, although the fact has been magnified by a new way of calculating energy bills.

There was also a small upward pressure from rising tobacco and alcohol prices, while DVDs were singled out as more expensive.

The retail price index, which includes mortgage interest repayments, has remained static at 4.1 per cent.

Core inflation, which excludes oil and food, has fallen by 1.2 per cent to the lowest level since August 2006.

CPI inflation remains above the government's target of two per cent, prompting speculation the Bank of England will be moved to further cut interest rates over the coming months.

With continued pressure on households, the Unison union has repeated its call for the government to raise public sector pay.

General secretary Dave Prentis said the "spiralling cost" of food and fuel is causing "real hardship" for public sector workers.

"It's time for the government to face up to the reality of inflation, which economics predict will rise further over the summer, and drop the unjust squeeze on public sector pay," he said.

Unison argues the government's insistence on below-inflation pay rises risks creating future recruitment and retention problems in the public sector.