Inflation is rising steadily above the Bank of England target of 2%, with a steep rise in February, due to the increased gas and electricity prices. Consumer prices have risen by 0.8% and are at the 2.5% inflation level, which is the worst since last May.

Changes in utility bills are generally gradual and spread out over several months. However, there has been a sudden rise right now due to the change in the Office for National Statistics’ Calculation. This has led to the gas rates going up a mind –numbing 13% and electricity is up 9.5% in February.

In the meanwhile, the central bank may have to change its usual method of methodical and slow interest rate cuts if it wants to prevent the credit crisis from worsening. With the worsening of prices for essential commodities such as oil, gas, electricity and food, there seems to be no respite in sight as most policymakers believe that the situation may just get worse before it has any chance of looking up again.

The trend seems to indicate that inflation may rise up above the dreaded 3% mark and this will force the Bank Governor Mervyn King to write a letter of explanation to the government to justify the overshooting of the target 2%.  Economists however hope that inflation would peak at 2.9%.

In this messy situation, the only consolation is that conditions are similar all over the developing world if not worse. The Euro Zone has indicated inflation of an astounding 3.3% in February.