Inflation rises above 3%

The rate of inflation reached 3.1 per cent in March, according to the consumer price index.

As a result, the governor of the bank of England, Mervyn King, will have to write to the chancellor and explain why an upper limit of three per cent inflation has been exceeded.

Analysts are now widely predicting a further increase in the base rate of interest in may as the bank of England struggles to bring inflation under control.

The surprise increase in January was an attempt to curb rising inflation, but that does not seem to have worked.

Ian Kernohan, an economist with Royal London Asset Management, predicts an increase in the interest rate when the Bank of England’s monetary policy committee meets next month.

“Interest rates will rise in May and the market is now pricing in at least one further rise this year,” he said.

Mr King told the BBC on Tuesday morning that he was “determined” to get inflation back down to around two per cent.

© Adfero Ltd

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