Reasons behind inflation rate

Date published: 17 February 2010

Reacting to yesterday's inflation figures, Brian Sloan, Head of Business and Economic Policy at Greater Manchester Chamber, said: "Although inflation now stands at 3.5% we need to put this into perspective.

“There are clear reasons behind the increase; the VAT increase and higher fuel prices continue to influence the year on year measure.

“This measure of inflation was over 5% only 18 months ago and with current excess capacity and increased competition amongst businesses it is unlikely to reach this level before falling back in the months to come.

“The Bank of England is taking a medium term perspective when setting interest rates so we do not expect this to lead to an increase in rates just yet, rather they will be focused on wage settlements. At the moment these have been restrained, should this stop the Bank may feel the need to raise rates sooner rather than later.”