Inflation 'partly caused by currency exchange rate'

The currency exchange rate for sterling is partly responsible for the UK's high rate of inflation.

This is according to Bank of England Monetary Policy Committee member Andrew Sentence, who has suggested that the low value of sterling was keeping inflation above the Bank's two per cent target.

Mr Sentance said: "Since mid-2007, the pound has lost nearly a fifth of its value against the euro and has fallen by around 25 per cent against the dollar."

However, inflation did fall slightly between May and June from 3.4 per cent to 3.2 per cent.

The European Commission has reported that the average annual inflation level in the eurozone was 1.7 per cent in July.

This is an increase on the June figure of 1.4 per cent and a substantial rise against the July 2009 rate of -0.6 per cent.

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Posted by Sarah Pitton