Tuesday, 17 May 2011

CPI has risen to 4.5%

The UK Consumer Prices Index (CPI) annual rate of inflation rose to 4.5% in April, up from 4% in March. However, the Retail Prices Index (RPI) measure of inflation - which includes mortgage interest payments - fell slightly to 5.2% from 5.3% in March. (BBC)
Clearly this is a serious situation; CPI is well over twice its target now. The Bank of England needs to start exercising extreme vigilance straight away, and maybe look into the possibility of writing a letter, saying something, to someone, if the situation does not improve over the medium or longer term.

However it would not be prudent to take any action as such; we must always factor in the possibility that inflation might fall  back to its target without any adjustment to the Bank Rate or other interventions. Give this possibility a policy of vigilant inactivity must be pursued with the utmost vigour immediately.


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