Inflation jumps to 2.9% - what does that mean?

By now we have all heard that the UK inflation rate has jumped well above the Bank of England's target rate of 2%. Analysts had predicted 2.6% but this increase from December's 1.9% surpassed even the experts expectations.  

The news is not welcome.  If the CPI continues past the 3% mark, Mervyn King, Govenor of the Bank of England will be writing to Chancellor Alistair Darling to explain why. Many already believe that this is inevitable.

So what does this all mean? Well so far, it has resulted in a surge in the Pound Sterling against other currencies.  On the face of it, this is good news is it not?  Well, not if it results in an increase in interest rates.  The potential results of a rate increase are obvious.

Is there any danger of an imminent rate increase?  Well, the latest inflation figures will certainly be cause for concern, but experts believe that the current policy of quantitative easing needs to continue for the time being. Which means, hopefully, interest rates will remain steady for the time being.  Watch this space.