Tuesday, February 16, 2010
Inflation at 3.5% - could have been worse
Posted by David Smith at 09:45 AM
Category: Thoughts and responses

Some expected a 4%-plus figure but, as it was, inflation was exactly in line with expectations at 3.5%, nevertheless requiring a letter of explanation from Mervyn King to Alistair Darling. The consumer prices index actually fell between December and January, despite the return of VAT to 17.5%. Normally, however, it falls much more, hence the jump in consumer price inflation from 2.9% to 3.5% and the even bigger jump in retail price inflation from 2.4% to 3.7%. More details here.

RPIX inflation, the old target, rose to 4.6%, up from 3.8%, well above its old 2.5% target. For all these measures, the Bank is confident that inflation will fall back sharply as the year progresses. At least that hope did not falter at the first hurdle with a bigger-than-feared CPI jump in January.