Dear Chancellor... why and when Governor has to write a letter

Mervyn King, Governor of the Bank of England, is required to write to the Chancellor if inflation moves away from the Government target by more than 1 per cent.

The letter will be published at 10.30am on the day the figure is released, and has to set out the reasons for divergence from the target, the policy for dealing with it, and the likely time it will take for inflation to return to a level within the target range. The current target, based on the Consumer Price Index, is 2 per cent, requiring a letter to be sent if it reaches 3.1 per cent. In November, it was at 2.7 per cent, a record.

At that point, an open letter would be sent to the Treasury. That has yet to happen, although inflation came close to over-shooting the target before the CPI measure was adopted.