The Consumer Prices Index (CPI) measure of inflation increased in the last month of 2009 to 3.7%, up from 3.3% in November. UK inflation has now remained above the Bank of England’s target of no more than 3% for 13 months
Some commentators have suggested that CPI will reach 4% by May. Meanwhile the Retail Prices Index (RPI) measure, which includes mortgage interest payments, rose to 4.8% from 4.7%.
The January VAT rise to 20% is widely expected to further fuel inflation at least until January 2012 when it will drop out of the equation.
The Office for National Statistics said the biggest drivers of inflation were air travel, fuel, utility bills and food costs.
The Bank of England is expecting the government’s round of budget cuts will result in a slowdown in spending which will bring inflation down over the next two years.
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