Rising inflation isn’t anything to panic about

Predictably enough it didn’t take long for the rearguard Remain lobby, and other opponents of the government, to jump on the latest inflation figures, which show the Consumer Prices Index (CPI) for February rising from 1.8 per cent to 2.3 per cent. Frances O’ Grady of the TUC, for example, said that Britain risked ‘sleepwalking into another living standards crisis’.

A little historical perspective might be in order, especially on the part of the TUC. Inflation of 2.3 per cent would have been a dream back in the late 1970s when its members were pushing the rate beyond 20 per cent through their endless wage demands. Inflation of around two per cent has been regarded for many decades as optimum – encouraging spending yet not eroding savings at too great a rate and guarding against the beast of deflation, where borrowers would find their debts increasing in real terms. That is why the Bank of England was set a target by Gordon Brown of keeping CPI as close to 2 per cent as possible.