Ouch. The cost of living in Britain is now rising at almost 5 per cent per annum. Consumers are feeling the pain – pain shared by the Bank of England, which has had to publish an open letter explaining why inflation is so high. Ten years after its creation, the UK’s monetary policy framework is about to be tested, and the Bank should be ready to raise rates to whatever level is needed to maintain its credibility.

The consumer price index rose from 2.8 per cent in February to 3.1 per cent in March; the retail price index, which includes housing costs, rose to 4.8 per cent, its highest level since 1991. The Bank’s target is CPI inflation of 2 per cent. If it misses that level by more than a percentage point the Bank’s governor has to write a letter of explanation to the chancellor. On Tuesday, for the first time since the Bank’s independence 10 years ago, he did so.