Inflation rise makes interest rate rise likely

With inflation rising to 3.7% in December (up from 3.3% in November) life gets ever harder.

Costs seem to be going up all the time, but small businesses are unable to raise their prices. Inevitably profits gets squeezed.

Even worse, the rise in inflation will bring increasing pressure on the Bank of England to raise the base interest rate, which has been at its historically low figure of 0.5% since coming down to that level in March 2009. The value of the pound rose on expectation that interest rates would be rising some time soon.

Inflation has now been above the Government target of 2% for the last 13 months. (By the way, if you kept missing targets month after month, would you expect to be sacked?)

The Office for National Statistics reported that the main causes of the latest rise were air transport, fuel, utility bills and food costs. Steer clear of those, then, and you probably won't feel the effects. Good luck.

If you want a bargain, however, why not buy yourself a camera, a video camera, a TV or a DVD? They have all tumbled in price. Not exactly the kind of things you buy when times are tight, are they?