Inflation hits 3.5%

Mervyn King will be writing another letter to the chancellor
Mervyn King will be writing another letter to the chancellor

By staff

Mervyn King will have to write another letter to the chancellor after inflation rose to 3.5% in January.

The Bank of England governor must write to Alistair Darling if inflation is more than one percentage point above or below the two per cent target.

Today's official figures show inflation is now rising at the fastest pace for 14 years, up from 2.9% the month before.

Higher petrol prices and the return to 17.5% VAT may have driven up consumer price index (CPI) inflation.

Retail price index (RPI) inflation rose from 2.4% to 3.7% in January.

Shadow chief secretary to the Treasury Philip Hammond said: "These figures will be worrying news for millions of families facing falling real incomes.

"The independent Bank of England faces a difficult balancing act between controlling inflation in the short term and keeping interest rates low to support the recovery.

"The government must now heed the advice of Britain's leading economists and set out a credible plan to get the deficit under control, starting this year."

Liberal Democrat Treasury spokesman Vince Cable said: "This figure is a stark reminder that despite the small growth in the economy at the end of last year we are still living in very uncertain times.

"The Bank of England's explanation of this as a temporary blip is welcome but there is a danger that inflation will stay high while growth remains low."

The figures were not unexpected. The Bank of England had predicted that inflation would hit 3.5% this year before falling back to the two per cent target. It believes inflation will fall to 1.8% toward the end of the year due to the weakness of the economy.


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