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Inflation at 4 per cent, double the target rate, might not seem much to celebrate, but at least the Consumer Prices Index didn’t go up as had been feared. The Retail Prices Index, the older measure still used for many commercial contracts and for index-linked gilts, is 4.9 per cent, so not much to cheer about there either. And UK inflation is still a bit higher than in the US and Europe, though not massively so.

The message is clear. Crunching down inflation was always going to be a slog, and while real incomes are now positive – ex-bonus earnings are up 6.2 per cent on the year – those first cuts in rates from the Bank of England are not going to come until May at the earliest. Then in the summer there is likely to be a huge political problem. Headline inflation will probably be down to 2 per cent by April and then run through the summer at around that level, maybe even a bit below. So there will be great pressure for the Bank to cut rates. But underlying inflationary pressures will remain, and the danger is while inflation does indeed dip down through the summer, it will then perk up again.

The reason is that inflation in the price of goods has pretty well disappeared, but the price of services is still climbing. For example, new and used cars are actually cheaper than they were a year ago, on average down 2.1 per cent. Energy is cheaper too, with natural gas prices down more than a quarter. But services are nearly all up, some sharply so. Package holidays are 11.5 per cent on January last year; catering is up nearly 8 per cent;........

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