Inflation in Britain unexpectedly rose to a four-month high in October forcing Bank of England Governor Mervyn King to write another public letter explaining why inflation remains so far above target.
The Office for National Statistics said annual consumer price inflation rose to 3.2 per cent last month, more than a percentage point above the central bank's 2 per cent target. Analysts had expected it to hold steady at 3.1 per cent.
The figures highlight the dilemma facing the Bank of England, grappling with stubborn price pressures at a time when painful public spending cuts risk throwing the recovery off track.
On the month, consumer prices rose 0.3 per cent, again slightly more than the 0.2 per cent increase expected. That rise was led by higher petrol costs, a sharp jump in the price of computer games, and the fact that reductions in overdraft charges last October were not repeated last month.
Inflation in Britain has been surprisingly stubborn over the past year, and is running well above comparable rates in the euro zone and United States.
In his public letter to chancellor of the exchequer George Osborne, to be published at 10:30 am, King is likely to reiterate his view that upward price pressures will prove temporary.
Projections published by the central bank last week showed inflation could rise above 3.5 per cent at the start of next year - when a rise in VAT will kick in - but would fall back below 2 per cent in early 2012.
Retail price inflation, which includes more housing costs and forms the basis of many wage deals, eased slightly to 4.5 per cent from 4.6 per cent in September.
Reuters