Inflation hits 4pc, Double the Target!

Inflation surged to double the Bank of England's target in January, increasing pressure on the central bank to raise interest rates.

 

The increase in VAT to 20pc and rising oil prices were behind a jump in inflation in January 

The official measure of how fast prices are rising, the consumer prices index (CPI), climbed 4pc in the year to January, up from 3.7pc the previous month.

The jump, which was driven by higher oil prices and the recent increase in value added tax (VAT), is the biggest in more than two years, according to the Office for National Statistics.The rise - correcly forecast by economists - means CPI inflation has been at least a percentage point above the Bank of England's 2pc target for more than a year.

"This is another kick in the teeth on the inflation front for the Bank of England, albeit slightly less hard than some had feared," said Howard Archer, UK economist at IHS Global Insight. "It maintains pressure on the Bank to retaliate by raising interest rates sooner rather than later.

Mervyn King, the Bank of England's governor, continued to blame the "temporary effects" of factors such as the increase in VAT at the start of the month, the fall in the pound and soaring commodity prices.