Inflation hits 3.4%

Courtesy of the LES.................Inflation hits 3.4% thanks to sky high petrol prices.

They say soaring petrol prices sent annual inflation to 3.4% last month after the cost of living rose quicker than expected, official figures showed today.

Consumer Prices Index inflation leapt from 3% in February after petrol prices rose by 2.7% in the month, according to the Office for National Statistics.

The CPI rise - bigger than economists had forecast - presents a headache for the Government at the start of a crucial week for economic data.

The ONS said energy prices also contributed to the rise in inflation as well, but the pressure from petrol threatens to draw attention to Labour's 1p on fuel duty imposed on April 1.

Motorists have been facing record costs at the petrol pump, with oil prices hitting 18-month highs. The AA said the average cost of a litre of petrol was 120.9p, against 95.2p a year ago.

Retail Prices Index inflation - which includes the cost of mortgages and housing - also rocketed last month, reaching 4.4%, the highest since September 2008.

CPI inflation eased back sharply in February to 3% from 3.5% in January and economists had only expected the benchmark measure to rise to about 3.1% last month.

If CPI remains more than 1% above the Government's 2% target this month, Bank of England governor Mervyn King will be forced to write another letter of explanation to the Chancellor.

He last wrote to Alistair Darling after the CPI's spike in January, but the Bank has forecast that inflation should ease by the third quarter.

The ONS figures show a record uplift from transport costs, including petrol prices and air fares, with the annual rate of inflation 11.3% - the highest since at least January 1997.

Food costs also pushed CPI higher, with vegetables affected by the adverse weather at the start of the year.

The data is the first in a week of economic indicators, culminating in the estimation of first quarter gross domestic product on Friday. There are also the latest statistics on unemployment, minutes of the last interest rate meeting, retail sales and borrowing figures for the full financial year.

However I am no financial expert but I feel they are also missing the fact that our lords and Master banged £175 BN of quantative easing into the market place.
Have a wee look at what happened to Japan when it hit 15% hyper inflation due to quantative easing paybacks.