Inflation expected to fall after 3.5% spike

INFLATION might surpass January's 14-month high of 3.5 per cent tomorrow as February's Consumer Prices Index is unveiled. The current consensus is for CPI to fall back to 3.1 per cent, although forecasts range from 2.8 per cent to 3.6 per cent depending on how many retailers passed on VAT hikes.

The Bank of England is so far unworried about the spike above its 2 per cent CPI target.

The CBI said it expects inflation to fall back considerably this year, with CPI dropping below 2 per cent by the end of 2010 and remaining below target throughout 2011.