The dangers of falling exchange rates

The CPI measure of inflation's rise to 3.2 per cent is an early warning of the dangers that a falling exchange rate can have in recessionary times.

Whilst the RPI measure that includes property prices and mortgages is =now officially at nil pder cent,the consumer index is driven higher by the increased cost of imported goods as sterling declines.

Thus Mervyn King will now once again be forced to write to the Chancellor to explain why inflation is above the 2 per cent rate.