UK inflation up again to 3.4%

| April 20, 2010 | 0 Comments
UK inflation up again to 3.4%

The UK’s official rate of inflation rose to 3.4% in March, up from 3% in February and again exceeding the Government’s target of 2%.

The rate, which is based on the Consumer Prices Index (CPI) and therefore excludes housing costs, was on the wrong side of expectations as it nudged towards the 14-month high of 3.5% recorded in January.

According to the Office for National Statistics (ONS), the rise was driven by higher petrol, food and clothing prices and the continuing effects of the reinstatement of VAT at 17.5%, in January.

The CPI inflation rate is a benchmark for the Bank of England’s Monetary Policy Committee, which sets the base rate.

However, in February the Bank’s governor, Mervyn King, dismissed fears that soaring inflation that would demand a significant rise in interest rates in the months ahead, saying that inflation was likely to fall back to its 2% target in the second half of 2010, and then fall further.

With the outlook unchanged, the base rate should remain at or near its current historic low of 0.5% in the short-term.

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