Now that inflation — as measured by the Consumer Price Index — has risen to 3.5%, Mervyn King has had to write a letter to the Chancellor, Alistair Darling, to explain himself.
Helpfully, the Adam Smith Institute has drafted it for him. “Dear Al, as you are aware, the Bank of England recently printed £200 billion of new money.
“This new cash was used to plug your Government's record-breaking budget deficit, and pumped into the economy via public spending. You also raised VAT by 2.5% at the end of 2009, pushing up retail prices. Are you really that surprised that we are seeing inflation? Lots of love, Merv x.”