Inflation hits 3.5% but is only ‘temporary’ says King

Reporter: James Trueman
Date online: 17 February 2010

The level of Inflation has soared to 3.5% in January, jumping 0.6% since December 2009 to the highest level of inflation in the last 14 months.

After the office for national statistics figures revealed that inflation had hit 3.5%, Bank of England governor Mervyn King was obliged to write a letter to Chancellor of the Exchequer Alistair Darling explaining why the level of inflation had reached well above the government’s 2% annual target. Citing the re-instatement of the 17.5% VAT level, high food and oil prices, and the depreciation of the pound, as reasons for the rise, King was quick to re-assure that the level would only be temporary, and inflation would more than likely fall in the second half of the year due to long term factors such as low demand would push down on inflationary pressures.

Some local voices were quick to calm fears that the economy is still not recovering, asking for some perspective to be shed upon the new figure.

Brian Sloan, Head of Business and Economic Policy at Greater Manchester Chamber, reacted to the rise by saying: "Although inflation now stands at 3.5% we need to put this into perspective.“

“There are clear reasons behind the increase; the VAT increase and higher fuel prices continue to influence the year on year measure.

“This measure of inflation was over 5% only 18 months ago and with current excess capacity and increased competition amongst businesses it is unlikely to reach this level before falling back in the months to come.”