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| Version 2 | Version 3 |
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| Inflation could break 3% barrier | Inflation could break 3% barrier |
| (about 1 hour later) | |
| The rate of inflation is expected to have risen above 3% when the figures for May are released by the Bank of England later. | The rate of inflation is expected to have risen above 3% when the figures for May are released by the Bank of England later. |
| This could force the Bank's governor to write to the chancellor explaining why the rate is above the target of 2%. | This could force the Bank's governor to write to the chancellor explaining why the rate is above the target of 2%. |
| Rising oil and food prices have pushed up the cost of living, while the UK's economic growth has slowed. | Rising oil and food prices have pushed up the cost of living, while the UK's economic growth has slowed. |
| In April, the Consumer Price Index (CPI) rose unexpectedly from 2.5% to 3%, the biggest rise for six years. | In April, the Consumer Price Index (CPI) rose unexpectedly from 2.5% to 3%, the biggest rise for six years. |
| Some analysts predict CPI in May to have reached 3.2%. | Some analysts predict CPI in May to have reached 3.2%. |
| This would almost certainly be the first of several letters Howard ArcherEconomist Are you feeling the credit crunch?Viewpoint: Sir Alan Budd | This would almost certainly be the first of several letters Howard ArcherEconomist Are you feeling the credit crunch?Viewpoint: Sir Alan Budd |
| UK consumer price inflation for May is due at 0930 BST. | |
| Rising inflation has affected many of the world's leading economies, and the UK has been among those affected. | Rising inflation has affected many of the world's leading economies, and the UK has been among those affected. |
| "Having leapt unexpectedly in April, there is a serious chance that consumer price inflation will move higher in May," said Vicky Redwood, an analyst at Capital Economics. | "Having leapt unexpectedly in April, there is a serious chance that consumer price inflation will move higher in May," said Vicky Redwood, an analyst at Capital Economics. |
| If inflation rises more than one percentage point above the government's 2% target, the Bank of England governor must write a letter to the government to explain what action it is taking to control consumer prices. | If inflation rises more than one percentage point above the government's 2% target, the Bank of England governor must write a letter to the government to explain what action it is taking to control consumer prices. |
| Mervyn King and his colleagues are likely to blame international commodity price hikes. | Mervyn King and his colleagues are likely to blame international commodity price hikes. |
| Mr King has only had to write such a letter once before, in April 2007. | |
| "This would almost certainly be the first of several letters, as consumer price inflation looks well set to reach 4% this summer before starting to fall back late in the year," said Howard Archer, UK economist at Global Insight. | "This would almost certainly be the first of several letters, as consumer price inflation looks well set to reach 4% this summer before starting to fall back late in the year," said Howard Archer, UK economist at Global Insight. |
| Economic slowdown | Economic slowdown |
| But the UK Monetary Policy Committee (MPC), the group of experts that sets the Bank of England's interest rates, is in a tight spot. | |
| Richard Scott explains some of the factors pushing up inflation | |
| Analysts warn that raising interest rates to curb inflation would dampen an economy already dented by slowing growth and a weakening housing market. | Analysts warn that raising interest rates to curb inflation would dampen an economy already dented by slowing growth and a weakening housing market. |
| At its latest rate-setting meeting on 5 June, the Bank left its main interest rate unchanged at 5%. | |
| The MPC had already cut interest rates three times since December in an attempt to help the slowing economy. | |
| However, Mr King and his colleagues will need to be convinced that the inflationary threat has passed before they contemplate cuts in interest rates - despite pleas from those struggling in the housing market. | |
| The European Central Bank, which governs the 15 nations using the euro, warned earlier this month that inflation remained its biggest concern and that it would raise rates if it felt price stability was under threat. | |
| Passed on | |
| Consumers and companies are already feeling the effects of higher energy and food bills. | |
| Oil prices have nearly doubled over the past year and on Monday the price hit a fresh high of almost $140 in New York. | |
| That in turn has pushed up the cost of petrol and diesel, prompting many people to rein in their spending in other areas. | |
| At the same time, many food prices have surged to record levels because of increased demand and inclement weather in key producer nations. |