Despite the inflation figures, MPC will sit tight

Today's figures show inflation is proving stickier than expected, but there is no need for the Bank of England to panic — yet.

Rising wheat costs have grabbed the headlines, but the Bank's Monetary Policy Committee is looking beyond the short-term shock of food prices and VAT hikes and expects the recent strength of the pound to feed into cheaper imports.

Of course, this may be little comfort for households spending more of their hard-earned cash on the weekly shop while wages stagnate or fall in real terms.

But the MPC believes the figures are masking the true weakness of the situation and the huge economic slack of a record recession and will not be inclined to hike rates yet.

That said, CPI inflation is still well above the 2% target and has been for nine of the past 51 months — and will stay there throughout next year at least.

It's a situation which will continue to worry MPC hawk Andrew Sentance, who is currently pressing to raise borrowing costs after second-quarter growth of 1.2%.

The uncertain prospects ahead argue for no change or even a loosening in policy, but the one thing that will push rate-setters to join him is if the CPI's stubbornly high performance feeds through to attitudes and expectations.

Then the MPC would be under enormous pressure to act in order to protect its credibility.