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Tuesday, March 18, 2008

Inflation Up

Consumer Price Inflation (CPI) rose to 2.5% in February, it was 2.2% in January, as a result of increases in energy bills.

The Bank of England's target for CPI is 2%, any rate above that makes it more difficult for the Bank to cut interest rates.

However, given the financial tsunami that is heading our way from the USA, it is likely that the Bank will have to cut rates further if it is to try to avoid recession in the UK.

Whilst the headline rate may look relatively benign, underlying increases in the price of staples such as; cheese, milk and bread prices (which rose by a staggering 17.6% in February) will hit households very hard.

The Retail Prices Index (RPI), which is a better guide to reality, remained unchanged at 4.1%.

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