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Inflation expected to exceed 3%

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by Kay Mitchell

The Office for National Statistics (ONS) will announce the UK inflation rate this morning, which analysts are expecting to be around 3.5%.

Last month, the ONS reported that Consumer Price Inflation (CPI) rose at its fastest annual pace in 9 months in December, rising to an annual rate to 2.9%.

The rise was driven by higher petrol costs and the effects of the reduction in the standard rate of VAT.

Bank of England Governor, Mervyn King, has already warned that inflation will rise but if inflation is one percentage point above or below the 2% target, he will have to write to Chancellor, Alistair Darling, to explain why.

However, while prepared for a 3.5% peak, Mr King believes inflation will fall back sharply later this year, to below the target.

Separately, Retail Price Inflation (RPI), which includes mortgage costs and is used as the basis for many wage deals, is also expected to have risen in January.

Most economists expect RPI to have grown to 3.8%, from a rate of 2.4% in December.

Figures are due at 09:30 today.

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News posted: February 16, 2010

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