UK inflation rate rises to 4.4 per cent
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The CPI annual inflation rate has jumped to 4.4 per cent in February, its highest level since 2008, according to figures from the Office for National Statistics.
The rate is up from 4 per cent in January 2011 and has been driven by domestic heating costs and clothing. RPI now stands at 5.5 per cent, up from 5.1 per cent in January.
The increase may place further pressure on the Bank of England to raise interest rates.
Last month, Bank of England governor Mervyn King said inflation was likely to remain well above target for this year, before falling back in 2012, based on bank rate increases “in line with market expectations”.
He said: “Although one cannot be sure, prices excluding the effects of these factors would probably have increased at a rate well below the 2 per cent inflation target.
“Inflation is likely to continue to pick up to somewhere between 4 per cent and 5 per cent over the next few months. That primarily reflects further pass through from recent increases in world commodity and energy prices.
“The MPC’s-central judgment, under the assumption that bank rate increases in line with market expectations, remains that, as the temporary effects of the factors listed above wane, inflation will fall back so that it is about as likely to be above the target as below it two to three years ahead.”
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Readers' comments (13)
Nick | 22 Mar 2011 9:47 am
and what's the Bank of England doing?......NOTHING!
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John Lacy | 22 Mar 2011 9:53 am
Nick---doing nothing is their best bet for the time being.
Raising interest rates will achieve nothing except higher inflation and a slow down in any recovery---the things causing our inflation are outside of the control of the Bank.
The logical thing to do at this point from an historical point of view would be to cut taxation to stimulate growth but after the mess Blair, Brown and Balls left behind even that is not an option. Let's stop the tinkering for 6 months and see where we are headed!
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Anonymous | 22 Mar 2011 9:56 am
Inflation is mainly coming from outside the UK, in fuel costs largely. Raising interest rates will do nothing to slow rising oil prices and could damage our recovery.
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Bill | 22 Mar 2011 10:14 am
Raising UK interest rates will do nothing to prevent the rise in the cost of oil and imported cotton - don't forget that a lot of the synthetic fibres you are wearing are also derived from oil products.
At the moment I understand that there is very little evidence of wage price inflation, which would be more suitably controlled by domestic interest rates. I certainly don't have too many client or friends ecstatic with this year's pay rise!
A rise in domestic rates now, with the majority of borrowers on variable interest rates would be devastating for the economy and would directly lead to inflation due to the rise in mortgage costs.
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Anonymous | 22 Mar 2011 10:33 am
What about savers? We need to see an increase in interest rates. Low interest rates are devastating to our savings!
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Samantha | 22 Mar 2011 10:47 am
This problem appears to be getting bigger all the time. I have been following the economist Shaun Richards who writes the Notayesmanseconomics blog and he points out this fact which is often hidden in the headlines.
"If we for a moment look at our old inflation target of RPI-X we can see that it is indicating an even larger problem than that shown by the current measure. It was targetted to be 2.5% and today it is at 5.5% which is 3% over what was its target. I have long argued that it is a superior measure to Consumer Price Inflation and therefore it means that our inflation problem is worse than the already poor headline figure."
I like his policy prescription too...
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ontheotherhand | 22 Mar 2011 10:57 am
Raising interest rates actually achieve two things;
It would strengthen the pound which would reduce the price of these imported items.
It would vitally demonstrate that the BofE is serious about its 2% mandate and thus control the inflation expecations of the population. Once inflation expectations become entrenched they are difficult to remove.
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Stuart Rathbone | 22 Mar 2011 11:59 am
That’s it bail out the feckless reckless buy now pay later crowd of all stripes (base punter to TBTF bank) with cheep money and currency debasement (QE) and screw the thrifty folks who have saved to be dignified & independent who should not have to take risks in order to protect their capital and god forbid a little bit of income too. Let’s have some good honest deflation, clear the system and let those who have overstretched themselves take it on the chin. I’ll take Mises over Keynes any day but I am not a politician with the need to get re-elected every few years or a thrall of the IMF and the international banking cartel.
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lol | 22 Mar 2011 12:22 pm
Inflation 4.4% so how come the fsa needs to increase its budget by 10%, when the rest of us have no option but to tighten our belts?
Soon giving financial advice will only be an option for the very large institutions.
Then when the fsa have bled them dry?
Oh well I suppose that at least will do away with the need for a regulator
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Norm d'Plume | 22 Mar 2011 1:02 pm
I've had a suspicion since before the last election that the way out of the country's debt problem is inflation.
I hope that the Government is not cynical enough to let it happen...
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