FIGURES released by the Office for National Statistics (ONS) yesterday reveal soaring inflation, with the government’s preferred CPI rate hitting 4 per cent in January and the RPI up to 5.1 per cent.
This represents a huge 0.3 per cent increase in both indexes since December but still hides the real rate, which is 10 per cent or more for the majority of people, who are enduring rampant food, drink, fuel, accommodation and transport costs, whilst wages stand still or are reduced.
Since the inflation rate is above his two per cent target, Bank of England governor King wrote to Chancellor Osborne, showing that he hasn’t a clue as to what the future holds.
He wrote: ‘The MPC’s (Monetary Policy Committee) central judgement, under the assumption that Bank rate increases in line with market expectations, remains that inflation will fall back so that it is about as likely to be above the target as below it two to three years ahead.’
King said the rise in inflation was due to the VAT rise, the past weakness of the pound and recent rises in commodity prices.
The price of petrol was £1.27 a litre in January 2011, which the ONS said was a record high.
‘Two of the main factors that had an impact on the January data are the increase in the standard rate of Value Added Tax (VAT) to 20 per cent and the continued increase in the price of crude oil,’ the ONS said in a statement.
The British Chambers of Commerce yesterday called for interest rates to be kept at the 0.5 per cent level they have now been frozen at for two years.
‘Considering an increase in interest rates before the middle of the year would be a mistake,’ said BCC chief economist David Kern.
Unite general secretary, Len McCluskey agreed, saying ‘a rise in interest rates would hurt growth. Unite urges the Bank of England to hold its nerve.’
TUC General Secretary Brendan Barber also agreed, saying: ‘The last thing that should now happen is a rise in interest rates.’
Dave Prentis, Unison General Secretary, issued a warning: ‘The government must take action – the bubble is going to burst. You cannot expect people to continue to put up with rising prices, job and pay cuts indefinitely.’