UK inflation rises to 2.8%

20 March 2007

Inflation in the UK has risen again, raising the possibility of a further interest rates hike, to rein it in. 

On the Consumer Prices Index (CPI) – the Government’s preferred method of measuring inflation – the cost of living in February was running at 2.8%.  That’s up from 2.7% in January. 

These figures are compiled by the Office for National Statistics.  It says inflation was pushed up by increases in air passenger duty – and thus airfares. 

The figure of 2.8% is well above the Bank of England’s target of 2%.  If the CPI goes above 3%, then the Governor of the Bank of England, Mervyn King, has to write a letter to the Government explaining why it has happened. 

Financial analysts are predicting further interest rate rises off the back of this news.  Rob Carnell, who’s an economist at ING, said: “Today’s figures are a timely reminder that the Bank of England’s tightening work is probably not yet finished.”