VAT Increase Causes 4% Inflation Rise

Published on February 18, 2011 by Crawfords Accounting

We knew it was coming, but it still doesn’t make it any easier to swallow, as the annual UK Consumer Prices Index (CPI) inflation rises at its highest annual rate in over two years. The 4% increase has put the pressure on the Bank to raise interest rates in the near future. The offending factors are the VAT increase along with the ever climbing costs of crude oil.

Mervyn King, the Bank of England governor, has informed the government what the results of the inflation rise will be and how it can be tackled. He discussed the inevitable increases in interest rates and has said,

“The MPC’s central judgement, under the assumption that Bank rate increases in line with market expectations, remains that inflation will fall back so that it is about as likely to be above the target as below it two to three years ahead.”

There are also lesser factors which have contributed to the inflation, such as the increase of transport costs, restaurants, hotels, alcohol and furniture.

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