Inflation leaps to a two-year high

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The Independent Online

Inflation is likely to jump to a two-year high today, as economists predict the headline rate will peak soon at more than 5 per cent – raising further questions about whether the Bank of England should raise interest rates faster than expected.

Such a move, which could come as early as May, would quickly add about £40 to the average monthly mortgage bill. David Cameron recently said the rate of inflation was "concerning".

The surge in global commodity prices is likely to see inflation hit 3.5 per cent or more, up from 3.3 per cent in November, and the highest since June 2008. Import prices rose at an annual rate of 12.5 per cent last month, while this month's rise in VAT from 17.5 to 20 per cent will also push prices up.

On the Retail Prices Index inflation will probably rise to around 4.8 per cent, reaching 5.2 per cent in February, according to economists.

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