Soaring petrol prices to push up CPI inflation

DRAMATIC rises in the price of petrol are expected to push the rate of inflation further above the Bank of England’s two per cent target when the official figures are released today.

The price of unleaded fuel has jumped nearly 11 per cent since the start of the year, with diesel up 10 per cent, according to the AA. Economists believe the hikes will send the April edition of the consumer prices index (CPI), the basket of goods used to measure inflation, higher than its level of 3.4 per cent in March.

The retail prices index (RPI), which includes housing costs and which stood at 4.4 per cent in March, is also expected to be forced higher.

Mervyn King, the governor of the Bank of England, will have to write a letter to new chancellor George Osborne if the Office for National Statistics data show inflation is more than one percentage point above the bank’s target of two per cent.

But despite fears over rising inflation in the short term, the bank’s quarterly forecast last week suggested it would dip below two per cent next year. The dovish update hinted the bank would keep monetary policy loose while the economy remained in recovery, particularly with the prospect of public spending cuts.