Chancellor defends King on inflation

In particular he denied the decision to raise VAT to 20% at the start of last month was making conditions harder for the Bank, dismissing its effect as a one-off. "I think any monetary authority can see through temporary increases in price levels to look to permanent threats to inflation," he said. His comments come as governor Mervyn King is under pressure over the decision to keep interest rates at their record low of 0.5% for two years, despite rising prices. However, Osborne said he had faith in King and the MPC despite inflation hitting 4%, which is double the target figure, th...