Inflation set to rise again for second month in a row
The Chancellor might be in for a Valentine's Day surprise as new data could show that inflation has risen for the second month in a row. Economists predict that the latest Consumer Prices Index inflation, which measures household costs and will be announced on Wednesday, may have increased from 4.0% in December to 4.2% in January.
This would mean that household costs are rising faster than they were at the end of last year. However, inflation is still less than half of what it was a year ago. This could potentially impact the Government's promises to control inflation, although this is likely to be a temporary setback before inflation starts to decrease again.
Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, believes that inflation reached 4.1% in January. He predicts that regardless of Wednesday's data, inflation is likely to drop significantly to 3.4% this month.
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Economists will be closely monitoring the data to understand its potential impact on the Bank of England. The Bank's Monetary Policy Committee (MPC) is responsible for keeping inflation as close to 2% as possible.
One of the main ways the MPC can achieve this is by adjusting interest rates. By raising rates, it limits the amount of money that mortgage holders have to spend, thereby reducing demand for goods and services. This can help alleviate pressure on prices.
If inflation is higher than the 4.1% predicted by the Monetary Policy Committee (MPC), it could delay any cuts to the base rate. Tuesday's Office for National Statistics figures showed wage rises were higher than expected, which could also delay base rate cuts as wage increases can push up