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Inflation at decade high

Published On 16 January 2007 at 13:45:50

Inflation has hit a ten-year high, figures released today confirm.

Following the Bank of England's surprise interest rate hike last week it had been speculated that the latest consumer price index (CPI) would show a rise in inflation.

Indeed, the index hit three per cent in December, up from 2.7 per cent and far beyond the bank's target of two per cent.

Inflation has not risen above three per cent since the bank gained control of interest rates and the CPI began in 1997. If it continues to rise, governor Mervyn King will be compelled to write to the chancellor Gordon Brown to explain the situation.

The Office for National Statistics confirms that the retail prices index (RPI) has also risen.

RPI increased from 3.4 per cent in November to 3.8 per cent last month. The headline rate, which includes mortgage payments, hit a more dramatic 4.4 per cent, up from 3.9 per cent.

The increases follow attempts by the Bank of England to stem inflation, with quarter point interest rate rises ordered in August and November 2006.

The continued rise in CPI has led some commentators to speculate that the bank could be forced to announce another rate hike next month, which would be its fourth in six months.

 

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