Belfast Telegraph

Nothing inflated about these very real fears

Inflation's on the rise again. Yesterday's data wasn't much of a surprise but the letter which Mervyn King wrote to the Chancellor George Osborne revealed a Bank of England governor shaking with fear behind his mahogany desk.

The below is the first draft of his letter to the Chancellor, before the PR people got hold of it:

Dear George,

I'd love to think your boundless optimism for the UK economy means this missive has caught you by surprise but I have a feeling you were expecting to hear from me.

I suppose, given I'm obliged to put quill to Bank of England-headed paper whenever inflation surpasses our target of 2%, you have gathered quite a few of these explanatory letters. And I wouldn't be surprised if you were fed up of reading them but this time I really think you should persevere. This time, it's serious.

Not the actual inflation level you understand, because we were expecting another big number and at 4.4% for the consumer price index yesterday it was even higher than most of my economist buddies expected. Meanwhile, the retail price index is already at 5% and one of my learned friends - who incidentally works at a bank you bought into a while ago - says this will dent disposable income.

But deep down you knew all that. If I'm completely honest I'm kind of hijacking this letter to let you into a few of my other insecurities about the economy.

Now I know you've been caught up in a lot of rioting and summer holidaying recently but while that's been going on there's been a bit of hoo-haa in the global economy. I know.

Just when things were beginning to look a bit more 2006 those darn markets have taken a bit of a dislike to how the treasury departments of some of our economic behemoths are managing their finances. Some of them have even questioned your handling of the UK economy but don't worry, I was quick to put them right.

I'm getting really worried that it could impact the UK economy and, combined with our already outrageously high inflation, cause some real pain for you, me and the man and woman on the street. There, I've said it.

I know these are normally more jovial monthly words but today I'm scared and I don't mind who knows it.

We must do lunch soon. Love to all the family.

Yours, Merv

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