Bank braced for further rise in CPI

THE Bank of England's monetary policy committee will face renewed criticism over spiralling inflation this week when fresh figures are tipped to show a further surge in consumer prices in December.

Rising commodity and food costs are expected to push the consumer prices index (CPI) up to 3.4 per cent from 3.3 per cent in November when the Office for National Statistics publishes its latest data on Tuesday.

The credibility of the MPC has recently been called into question on several occasions by City economists after its inflation forecasts substantially underestimated price rises. The CPI now lies well above the committee's 2 per cent target.

Prime Minister David Cameron last week admitted to fears over inflation and said figures were "well outside what the Bank of England is meant to deliver". CPI is expected to near 4 per cent over the next few months, creating a divide among economists over the best course of action for interest rates policy.

The odds are narrowing on a rate rise in the first half of this year but economists such as Roger Bootle, adviser to Deloitte, believe the inflation threat is only temporary and rates should remain low until the economy is on a far more stable footing.