Soaring inflation could add to consumers' debt

17/02/2010

Inflation has soared to 3.5 per cent, well over the Bank of England's Monetary Policy Committee's (MPC) target of two percent.

This could lead to an extra tight squeeze of the cost of living as the price of household bills, everyday products and petrol are all on the rise. And this is made worse by the fact, revealed by debt solutions experts, EuroDebt, that many people have not had a pay rise for more than a year.

With the UK's employment rate at its lowest in over a decade, many people could be in need of structured debt help as it becomes increasingly difficult to balance their income with their ever-rising outgoings.

The rise in the Consumer Price Index (CPI) inflation is the highest in 14 months as it jumped from 1.9 per cent in November 2009 to January's 3.5 per cent.

Mervyn King, the governor of the Bank of England, is obliged to formally explain to the chancellor Alistair Darling the reasons why inflation rose by more than one per cent.

In his open letter to Mr Darling, Mr King said that three main short term factors were responsible for the increase.

These were the restoration of the standard rate of VAT to 17.5 per cent; a rise in oil prices of around 70 per cent and the sharp fall in the value of sterling currency in 2007 and 2008 which is feeding through to consumer prices.

Posted by Jim Mead

Tags; Current UK Economy,

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