UK inflation surges to 4% in January


Today’s inflation figures will make painful reading for the Bank of England’s Monetary Policy Committee (MPC).

The Office for National Statistics (ONS) has announced Consumer Price Inflation (CPI) rose to an annual rate of 4% in January - the highest rate since November 2008.

On a monthly basis, CPI rose by 0.1%.

According to the ONS, the rise was attributed to higher oil prices and increased indirect taxation.

The latest figures takes inflation to double the target of 2% - where it has been for more than a year.

However, the figure was not unexpected, many leading business groups have previously suggested that inflation could reach 4% – because of the recent VAT hike.

The latest figure means the Governor of the Bank of England, Mervyn King, will again be forced to write a letter to Chancellor George Osborne to explain why inflation remains above target - this letter will be published later today.

Despite rising inflation, the Bank of England opted to keep interest rates at the record low of 0.5% last week – where they have been since March 2009.

Analysts said the reason behind the move is due to the sluggish recovery but the Bank will be forced to hike interest rates in the short-term.

Meanwhile, Retail Price Inflation (RPI), which includes mortgage costs and is used as the basis for many wage deals, surged to 5.1% in January, from 4.8% in December - this was the highest since May 2010.

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