The official figures of inflation that are due out in some time are expected to show a 3% hike in the rate of inflation for the month of January.

Reported as the fastest pace of inflation for the last 14 months, some economists predict Consumer Price Index inflation may have hit 3.5% last month. The major reason driving this hike is the VAT and also the increase in the petrol prices. Earlier the VAT had returned to 17.5%. As the Banks seek to aid recovery UK interest rates have been at the low level of 0.5% for 11 consecutive months.

However, the bank of England predicts that the inflation will fall to 1.8% by the end of the current year .On the other side the RPI (Retail Price Index) also is expected to rise. RPI which includes housing costs is expected to rise to
3.8% last month, from 2.4% in December. In December the CPI was 2.9%, the highest rate in the last 9 months.

The concern about the current high rate of inflation was a likely factor in the Bank choosing not to extend QE (quantitative easing) which was a policy designed to stimulate growth in the U. K economy.