Belfast Telegraph

Inflation goes up yet again

By Jamie Grierson

The pressure on already-stretched household budgets will be underlined today when official figures show another increase in the rate of inflation.

The consumer prices index rate of inflation is set to show a rise to around 4.4% in July - more than twice the Bank of England's 2% target - after a short-lived decline in the rate to 4.2% in June's figures.

The figures will be closely watched by rail travellers as July's Retail Price Index (RPI) number, which unlike CPI also includes housing costs, is the basis on which rail fares for next year are based.

Bank Governor Sir Mervyn King will be forced to write his seventh successive letter to Chancellor George Osborne, and his 12th in total, to explain why inflation remains so far above target.

The increase in CPI in July is expected by the Bank of England, which has forecast inflation hitting 5% by the end of the year as steep rises in electricity and gas prices come into effect.

With the UK facing a period of continued sluggish growth, the Bank expects inflation to fall below the 2% target to 1.8% in two years' time, particularly as the impact of this year's VAT increase falls out.