The chancellor must give the
Bank of England a clear position on inflation, claims a key industry expert.
Peter Spencer, chief economic advisor to the Ernst and Young ITEM Club, has questioned the prevailing system of targets given to the Bank by the government.
Inflation rates soared to three per cent in April. The pressure on UK inflation is coming from a surge in global energy, food and other prices rather than domestic sources and highlights a weakness in the current inflation targeting regime.
Mr Spencer says that the new inflation figures raise serious doubts about the specification of the inflation targeting regime as well as future economic prospects.
"With Consumer Price Index (CPI) inflation now at three per cent and hefty transport, energy and food price increases yet to come, it is now inevitable that the CPI will move and stay well above the target range this summer, requiring the Governor of the Bank of England to write a letter of explanation, probably several, to the Chancellor," explained Mr Spencer.
The most recent CPI figures, from the Office of National Statistics, showed large upward contributions from food and non-alcoholic beverages particularly meat, fruit, breads, cereals and fish.
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