UK inflation hits 3.5%
Posted by Jon Wilcox in Industry Sectors on Tue, 16/02/2010 - 16:48
The governor of the Bank of England has written a letter to Alistair Darling explaining why the British inflationary rate has exceeded its target.
Figures from the Office of National Statistics have today revealed that UK inflation rose to 3.5% in January, the fastest rate for 14 months.
The figure is 1.5% above the Bank of England’s target rate of 2%, obligating Mervyn King, the governor of the Bank of England, to write to the Chancellor of the Exchequer Alistair Darling, explaining the reasons behind the jump.
“Three short-run factors have driven the current measured rate of inflation up.” King outlined in his letter. “First, the restoration of the standard rate of VAT to 17.5% is raising prices relative to a year ago. Second, over the past year, oil prices have risen by around 70%. That is pushing up petrol-price inflation significantly, which, in turn, is raising overall CPI inflation. Third, although the exchange rate has been broadly stable over the past year, the effects of the sharp depreciation of sterling in 2007 and 2008 are continuing to feed through to consumer prices.”
The Bottom Line:If Mr Cable has his way...
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