UK inflation jumped to 3.5% in January

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Following the return to 17.5% VAT in January, inflation rose to 3.5% meaning the governor of the Bank of England needs to write a letter to the Chancellor.

Inflation rose at the fastest pace for over a year in January, with the Retail Price Index, which includes housing, rising 3.7%, with overall inflation 3.5%, up from 2.9% in December. When inflation goes 1% above the 2% target then Mervyn King, governor of the Bank of England writes to Alistair Darling to explain why. Much of the increase in inflation was attributed to the increase in VAT in January from 15% to 17.5%.

However, the governor is confident that inflation will fall below 2% by the

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