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Inflation up by 0.3% in January

The UK Consumer Prices Index (CPI) annual inflation rate rose to 4% in January, up from 3.7% in December, as the effects of the VAT rise were felt.

Higher oil prices also meant inflation remained well above the 2% target.

Retail Prices Index (RPI) inflation - which includes mortgage interest payments - rose to 5.1% from 4.8%.

The CPI figure is the highest since November 2008, and will put pressure on the Bank of England to lift interest rates to curb accelerating inflation.

The CPI measure has now been one percentage point or more above target for 14 months.

Ian McCafferty, CBI Chief Economic Adviser, said: “Everyone was expecting inflation to increase in January.

“The rise to 4.0% reflects higher petrol prices and the pass through of the VAT increase particularly in the hospitality sector.”

He added: “However, the effect of the rise in VAT was slightly less in January than had been expected, and seasonal discounting, particularly for clothing and footwear, also had an impact.

“We expect that inflation will be well above target for the remainder of the year.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .