CPI inflation rises above 2%

Consumer price index inflation rose to well above its 2% target in December, according to an inflation report released by the Bank of England.

The study found that the prospects for inflation remain uncertain and there are significant risks to its outlook - but added that if the Bank rate moves in line with market interest rates it is likely that it could fall below the target for much of the forecast period.

David Kern, chief economist at the British Chambers of Commerce stated that the report acknowledged that inflation is likely to break the 3% level in the next couple of months.

He added that he believed the spike would be a temporary situation and noted his happiness that the £200 billion quantitative easing programme is likely to be maintained for now.

Mr Kern commented on the fact that a double-dip recession could still be a possibility and it is up to the government and the Bank to stop this from happening.