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New inflation target set

The new inflation target announced by Gordon Brown, the Chancellor of the Exchequer, in his first Mansion House speech last night, was seen as reducing the pressure for further interest rate increases this summer, writes Diane Coyle, economics editor.

The Chancellor set a new target for inflation of 2.5 per cent, and said the Governor of the Bank of England would have to send an open letter of explanation whenever inflation rose above 3.5 per cent or fell below 1.5 per cent.

"I have tightened up the framework. I have made it more rigorous and I have made it more open," he said.

Report, page 24

Leading article, page 21