Tuesday, May 17, 2011
Inflation at 4.5%, Another Letter from the Governor
Posted by David Smith at 12:00 PM
Category: Thoughts and responses

It was indeed a lull. March's inflation rate of 4% (still double the official target) offered a hope of this year's inflation outturns getting better. That was dashed by the April number, 4.5%. It would be reassuring if you listened to the Office for National Statistics' line that a lot of this was to do with the timing for Easter, which is no doubt correct. On the other hand, we have the Bank of England itself warning that inflation will hit 5% later this year. More here.

Mervyn King's letter to George Osborne in response does not, unsurprisingly, break any new ground following last week's inflation report. We will know more about the wide range of views on the MPC tomorrow, when the minutes are published. But the arguments in the letter - particularly the claim that inflation would be below target if not for VAT, energy prices and import prices - are looking rather tired. The letter is here.