Inflation hits three per cent

PEOPLE could face a tighter squeeze on their pockets after new figures today showed that inflation had hit the three per cent mark.That is a full one pc more than the government's target.

PEOPLE could face a tighter squeeze on their pockets after new figures today showed that inflation had hit the three per cent mark.

That is a full one pc more than the government's target.

And there are fears that it could rise again next month as the effect of this month's interest rate rises works its way into the economy.

Ipswich MP Chris Mole said the new figure was not high enough to trigger an official letter from the Bank of England to the Chancellor of the Exchequer - but it did mean the squeeze could tighten.

That in turn could lead to more interest rate rises on the horizon - and possibly a slump in the property market which has been racing ahead over recent years.

Mr Mole said: “The government is anxious to prevent inflation taking off and this level is clearly the reason interest rates went up last week,” he said.

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The Consumer Prices Index (CPI) jumped from 2.7pc in November.

The Retail Prices Index (RPI), seen as a more representative measure of the cost of living as it also includes housing costs, spiralled to 4.4pc - the highest since December 1991.

Commenting on today's figures, John Dugmore, chief executive of Suffolk Chamber of Commerce, said:

"While disappointing, today's figures were not as appalling as some have feared, following last week's surprising rise in Bank Rate.

"The bulk of the acceleration in inflation over the past year has been due to the surge in energy prices.

“Inflation excluding energy prices was only 2.1pc. Core inflation (which excludes energy, food, alcoholic beverages & tobacco) was only 1.8pc.”

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