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Inflation rises to 2.5% in February

The latest figures out from the Bank of England show consumer price inflation rose 0.3% to 2.5% in February.

The figure was at 2.2% in January and month-on-month figures showed prices increased by 0.8% in February following the 0.7% fall in January.

The greatest price rise came from housing and utilities – which increased by 3.2% in the second month of the year as recent increases in gas and electricity prices were factored in to the index.

The Centre for Economic and Business Research says other contributors to the overall price increase came from furniture and household equipment and alcohol and tobacco, which were up by 1.3% and 1.1% in February respectively.

The rise in inflation, whilst expected, comes during a week when further difficulties have emerged in the credit markets.

Libor spreads have risen again as liquidity shortages re-emerge.

The CEBR says this contributed to the forced sale of US investment bank Bear Stearns to JP Morgan Chase and the coordinated injection of funds by world central banks last week.

The CEBR also says a succession of weak economic data from the US in particular has contributed to the tumbling dollar and soaring gold and commodity prices. It thinks this environment will cause the Fed to make a further large cut in US interest rates later today.

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