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Inflation rises quicker than expected

Figures released by the Office for National Statistics today said that annual inflation grew by 0.5% to 4.5% last month, the biggest rise since September 2008.

The increase was propelled by higher travel costs around the Easter period and a rise in duties on alcohol and tobacco. One of the few downward pressures for the month came from furniture and household goods as well as petrol, diesel and clothing.

Inflation is now running at more than double the Bank of England Monetary Policy Committee’s target of 2% which is intensifying the pressure on the Committee to raise interest rates from the historic low of 0.5%.

Bank of England Governor Mervyn King said in his letter to the Chancellor explaining the reasons for the rise: “The Monetary Policy Committee judges that attempting to bring inflation back to the target quickly risks generating undesirable volatility in output and would increase the chances of undershooting the target in the medium term.”

An increasing number of experts are predicting that interest rates will rise before the end of the year.

Source : The Retail Bulletin

17 May 2011
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