The jump signalled that inflation is running at more than double the 2pc target and well above the average pay deal, meaning many are experiencing effective pay cuts.
The RPI gauge, which some see as a better reflection of the cost of living as it includes more housing expenses, leapt from January's 5.1pc to 5.5pc, the highest since 1991.
The growing cost of heating homes and buying clothing was behind the month-on-month CPI leap, while fuel and food remain the major long-term price pressures.
The feed-through of the Government's decision to raise the VAT sales tax in January is aggravating the situation, said economists.
"With 20-20 hindsight the VAT increase ? was at best mistimed and at worst a major error," warned the Centre for Economics and Business Research, a think-tank.
To meet the Bank of England's central forecast that CPI will be 4.1pc in the current quarter, the rate would have to drop back to an "infeasible" 3.8pc for March, according to Philip Shaw at Investec.
Meanwhile, the public sector's net borrowing ? stripping out the cost of bailing out the banks ? hit �11.8bn in February, a record for the month, up from �9.5bn the year before.
Economists had thought that the figure would shrink, but the tax take disappointed.
Mr Osborne still looks on track to undershoot the Office for Budget Responsibility's �148.5bn forecast for borrowing for the full year, but with less headroom than hoped.
With one month left, he looks set to undershoot the target by �6bn rather than the �8bn recently hoped, said the Ernst & Young ITEM Club.
Going ahead, inflation threatens the Coalition's plans to reduce the budget deficit, if the squeeze on consumers' spending power ? and the knock-on effect on company profits ? reduces the money coming into the taxman.
Minutes for the March meeting of the Bank's Monetary Policy Committee, out on Wednesday could show the inflation worry pushed another member of the nine-strong panel to vote for an immediate rate rise, taking the split to four in favour and five against.
Opponents fear higher rates could derail the recovery, since growth should slow further as public spending cuts hit in full.
Just one in ten Britons expects the economy to strengthen in the next six months, according to a new Ipsos MORI survey.
Meanwhile the Organisation for Economic Co-operation and Development reported that the recent oil price spike could shave half a percentage point off growth across the world's advanced economies by 2012.
No comments:
Post a Comment