By Max Clarke
Producer price inflation hit 4.8% for January 2011- a 1% jump from December, data published today by the Office for National Statistics show. Much of this gain has been driven by soaring input price inflation- which rose by a further 1.7% in January largely due to the escalating cost of crude oil.
With pre VAT increase consumer price inflation for December reaching 3.7%- far exceeding the Bank of England’s Monetary Policy Committee (MPC) target of 2%, the ability of the Committee to control prices is being questioned.
The MPC’s monthly meeting convened yesterday, deciding to maintain interest rates at their historic 0.5% low for the 22nd consecutive month. If inflation continues unchecked, the Bank may be forced to raise interest rates- a move strongly opposed by the British Chambers of Commerce and the Federation of Small Businesses who anticipate doing so would impede struggling businesses, further delaying recovery.