By Max Clarke

Consumer Price Index (CPI) inflation has again risen to 4.4% for January, up from 4.0% in December. CPI is the measure used by government monitor overall inflation and January’s figure more than double the Monetary Policy Committee’s (MPC) 2% target. Mean CPI inflation across the European Union currently stands at 2.8%.

Volatility in the Middle East was particularly responsible for the rise, as soaring energy costs saw mean energy bills rising 4.0% from January to February. Contributing to the rise were increases in clothing and footwear (3.6%). Recreation and culture remained largely unchanged at 0.3% increase.

RPI, or Retail Price Index, inflation was also up, hitting 5.5% in February from its 5.1% in January.

Alcohol and cigarettes, however, fell by 1.1% over the year, with Spirits in particular responsible for a slight downward pressure on CPI, seeing a record 4.6% fall over Christmas.

“This will come as another boost to the MPC members who are champing at the bit for an interest rate hike come May.” Commented Jeremy Cook, chief economist at foreign exchange brokers World First.

“We had seen some of these thoughts temper in recent weeks on the problems in Japan and Libya, and the BOE Deputy Governor’s comments last week that were more dovish than recent communiqués but this release will put a hike back front and centre.

Concluded Cook: “However, we still think that it would be a mistake and that with growth still weak, a rate hike would be like throwing the baby out with the bath water.”