The latest price inflation figures show the Consumer Prices Index (CPI) measure of inflation at 4%, double the Bank of England inflation target.
CPI has risen from 3.7% in December to 4% in January.
The Retail Prices Index (RPI) measure of price inflation, which includes mortgage and housing costs, has risen from 4.8% to 5.1%.
Both measures of price inflation were pushed up largely by the increase in the standard rate of Value Added Tax (VAT) to 20% and the continued increase in the price of crude oil.
Inflation has now been above the government target of 2% by at least 1% for more than 14 months.
Bank of England governor Mervyn King will have to write another letter to the government explaining why inflation is above their target by more than 1%.
These latest inflation figures are bound to prompt further calls for an interest rate rise, although we maintain our belief that this would be the wrong course of action for the Bank of England to take at this time.
Price inflation in the UK is being pushed higher mainly as a result of temporary influences (higher VAT) and imported inflation (commodity prices). Increasing the domestic rate of interest would have no impact on these two factors but it would dent consumer spending ability and confidence, possibly damaging economic recovery.
It is never going to be comfortable for policy makers to watch inflation go higher and take no action in terms of interest rates.
It is worth remembering that the Monetary Policy Committee (MPC) had this latest price inflation data when they made their decision to hold interest rates at 0.5% last Thursday. What will be really interesting to see now is the balance of votes within the MPC and if opinions are starting to shift towards a rate rise.
We will be keeping a close eye out for the Bank of England quarterly inflation report on Wednesday and retail sales figures on Friday to look for any further clues about the future direction of monetary policy.
