UK inflation hits 3.5% in January

| February 16, 2010 | 0 Comments

The Office for National Statistics has today announced that Consumer Price Inflation (CPI) rose to a 14-month high of 3.5% in January - as widely expected.

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

Meanwhile, CPI fell 0.2% on the month as a result of post-Christmas discounting.

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

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

The Bank predicted that inflation will fall to 1.8% towards the end of the year, because the economy remains fragile as it continues to recover from the recession.

Meanwhile, Retail Price Inflation (RPI), which includes mortgage costs and is used as the basis for many wage deals, rose to 3.7% in January from 2.4% in December.

Analysts had expected a reading of 3.8%.

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