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Household squeeze 'to worsen'

The Bank of England governor made clear today that the squeeze on household budgets will only get worse. Sir Mervyn King said he expected inflation to rise to three percent or more by the Ssummer and stay above target for another two years.

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Inflation driven by energy bills, tuition fees and food

Hikes in energy bills and tuition fees are behind the high rate, as well as air fares and a recovery in alcohol and food prices.

Figures from the British Retail Consortium suggest the high street performed far better than expected, driven by heavily discounted clothes and shoe prices over the Christmas period.

Howard Archer, chief UK and European economist at IHS Global Insight, said that the weak pound was also a factor.

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