Only a week into his new job, and George Osborne has already had to exchange letters with Mervyn King about inflation. And here’s why: the CPI index hit 3.7 percent in April, up from 3.4 percent in
March. Which is worrying enough when looked at in isolation – but when put alongside headline rates from other countries, it becomes damning. In China, it’s 2.8 percent. In France, 1.9 percent. In Germany, 1 percent. In the Eurozone as a whole, 1.5 percent.
And in the US, 2.3 percent (for March, with the latest
figures out tomorrow). Indeed, thanks in part to quantitative easing and the removal of the VAT cut, inflation in the UK is now well ahead of almost any other major economy you could care to
mention. And with more inflationary pressures on the horizon, you imagine Osborne and King will be writing these letters for some time to come.
One thing to note about the letter Osborne wrote today, though, is its insistence that housing costs should be included in the CPI target:
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