Inflation hits 4.7% in August

By Sarah Engle, Wed 17 Sep 2008 - Published in Banking

The governor of the Bank of England has written a letter to chancellor Alistair Darling over the increase in inflation.

Mervyn King said that data from the Office for National Statistics (ONS) reveals that consumer price index inflation was 4.7 per cent in August, requiring him to send a letter explaining the reasons for the increase.

The governor suggested world agricultural prices increasing by 40 per cent, a 60 per cent rise in the price of oil and wholesale gas costs jumping 90 per cent have contributed to inflations rising from 2.1 per cent in December last year.

Mr King wrote: "Inflation is ultimately determined by the pressure of money spending on capacity, which is controlled by monetary policy.

"But, other factors here and in the rest of the world can have temporary implications for inflation."

In the letter, he predicted that inflation will "peak soon", although it will take time for it to reach the target set by the Bank and the government.

Figures from the ONS reveal that the largest upward pressure on inflation come from increased prices in housing and household services and suggests this was partially offset by decreasing heating oil costs.

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