One of the more durable achievements of the previous Government was the establishment of the Monetary Policy Committee (MPC), whose work – for around a decade – was widely praised. As the recession took hold, the MPC does seem to have been seriously off the pace. The announcement earlier this week that the Consumer Price Index had risen to 4% is way off the MPC’s prescribed target. Indeed, it looks likely that higher interest rates – for all their negative economic growth implications – will shortly be confirmed.

Worryingly for millions of households, the prices of basic products, including many foods and travel, are rising sharply. In certain sectors, though, price cutting remains to the fore – evidence that a highly competitive market is the best antidote to inflationary trends. However, as the 1970s demonstrated, eliminating inflation – once it has taken hold – is no easy task. At its peak, in the mid-1970s, it reached almost 27%. Aside from rigorous control of the money supply – quantitive easing notwithstanding – the market should be allowed to set prices.

Memories of the 1970s era include eminently forgettable industrial relations relics such as the Price Commission, Pay Boards and the TUC-backed ‘solemn and binding’ agreements. Fortunately, they – and others - have been consigned to history. It should also be remembered that borrowers, including the government – with its c£1 trillion debt mountain - generally benefit from rising inflation. The recent rise, though, in the 10-year gilt yield represents a partial risk adjustment to higher inflationary expectations.

Amongst the worst losers are savers, many of whom are now retired. Given that they are currently earning minimal interest on their savings, a bout of inflation represents a ‘double whammy’ in the evening of their lives. Is the time now ripe for dealing aggressively with inflation before it becomes embedded?