Inflation hits 3.5% - February 2010

Bank of England Governor, Mervyn King, must write to the Chancellor to explain the 3.5% UK inflation rate. It is expected that the explanation for this hike in inflation is largely due to the restoration of the 17.5% VAT charge and higher than normal oil prices.

It is important to note that the increase in Consumer Price Index (CPI) since last month is as predicted and the Monetary Policy Committee members believe that the rise in inflation is temporary and should fall back below the 2% target by the end of 2010. This is significant for those of us that are watching inflation and developments in monetary policy for the consequences it may have for us all at the interest level. 

Should increased inflation persist then it would be a clear sign that monetary policy would require some change. But should these predictions of a calming in inflation rates hold true, then we should likewise see everything hold steady for 2010. No need to panic - just yet. Watch this space!