Figures from the Office for National Statistics (ONS) show that the annual rate of inflation as measured by the headline Retail Prices Index (RPI) rose sharply to 3.7% in January, up from 2.4% in December.
The governor of the bank of England, Mervyn King, has had to write to the chancellor to explain the reasons behind the sharp increase.
John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development (CIPD), says that while most attention will be on the Consumer Prices Index (CPI) – which is now running at 3.5%, well above the 2% rate the Bank of England is required to target – workplaces will be more affected by the surge in RPI, which at least 8 in 10 employers use as the key cost of living benchmark when determining pay settlements.
He said: “With the late winter and early spring still an important period for pay bargaining