UK Inflation Soars To 2.9% But Mark Carney Avoids Humilating Letter To George Osborne

Carney Escapes Grovelling To Osborne

Bank of England Governor Mark Carney has been saved the embarrassment of explaining to Chancellor George Osborne how rising inflation rose to just 2.9%, instead of exceeding the 3.0% level as originally expected.

Rising fuel and clothing costs led to a spike in consumer price inflation from 2.7% in May to 2.9% in June, according to the latest figures published today from the Office of National Statistics.

An inflation rise to above 3% forces the Bank of England Governor to write to the Chancellor explaining how it has risen so far, since it would exceed a percentage point off the 2% inflation target set by the Bank. The Governor is forced to write every three months if inflation continues to be out of the one percent range. However, Carney would not have been too personally tarnished by June inflation figures as he took over at the Bank of England on 1 July.

By contrast, Carney's predecessor Mervyn King has had to write 14 letters to the Chancellor explaining why inflation has been off-target, with the first letter being in April 2007.

In further evidence of the rising cost of living in the UK, the overall price of materials and fuels bought by manufacturers for processing increased by 4.2% and retail prices rose 3.3% in the twelve months up to June 2013.

Howard Archer, Chief UK Economist at IHS Global Insight, said: "After a series of largely encouraging data and surveys pointing to recently improved economic activity, Mark Carney’s luck appears to be holding as consumer price inflation came in slightly lower than generally expected at 2.9% in June."

Labour's Shadow Treasury Minister Catherine McKinnell said: "With prices now rising much faster than wages the cost of living crisis is getting worse. Despite all the complacent claims from Ministers about the economy, these figures show that for ordinary people life is getting harder under David Cameron's government.

"After inflation, wages are down by an average of over £1300 since this Government came to power. Millionaires have got a huge tax cut, but millions of people on middle and low incomes are worse off under the Tories.


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