By Tom Higham

News from the Bank of England today that UK inflation is likely to rise to over 3% in the coming weeks. Should this happen then Mervyn King the governor of the bank of England will have to write to the Chancellor to explain why inflation is rising so rapidly and what the central bank plan to do to control it.

Rising inflation is usually controlled by rising interest rates but with the economy on the verge of falling back into recession so the Bank of England cannot really increase interest rates making their job very difficult. This also means the pressure is piling up on the Pound and exchange rates are sufferring this morning with Sterling falling against most the major currencies. Sterling Dollar exchange rates have fallen by a cent while Sterling Euro exchange rates are down by half a cent.

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