A harbinger of things to come?
The latest inflation figures are out this morning and they look worrying.
The Consumer Prices Index (CPI), the government's preferred measurement, in December from 1.9% in November, the biggest monthly rise in the annual index since records began and more than the City's expectations for an increase to 2.6%.
The headline rate of Retail Prices Index (RPI) inflation, which includes mortgage interest payments and which is used to calculate rises in welfare payments and in wage negotiations, rose to 2.4% from 0.3%. Only a few months ago the RPI was in negative territory.
The underlying rate of RPI, which is also used in pay talks, soared to 3.8% from 2.7% over the same period.
Inflation has been the least of the government's worries since the banking crisis led to recession but these figures will concern the Treasury and the Bank of England, especially since inflation will be been given another upward twist this month with the return of Vat to 17.5%.
The Bank has already warned that inflation will exceed its 2% target in the first months of this year given the sharp rise in energy prices and the decline of sterling, which pushes up import prices. Crude oil prices have doubled in the past 12 months, while sterling is 25% weaker against a basket of currencies than it was two years ago.
The Bank, which will have to write a letter to the Treasury to explain why inflation has exceeded its target when the January CPI also turns out to be over 2%, expects inflation to fall after the current spike as 2010 proceeds. Its official stance is not to be concerned. But many economists are convinced that the unprecedented loose monetary policy -- record low interest rates and the massive printing of money -- will inevitably lead to inflation and that the latest figures are not so much a blip as a harbinger of things to come.
Some senior City economists, such as Michael Saunders of Citigroup, even expect interest rates to rise later this year, which could threaten recovery.
I have operated on the assumption that interest rates would stay flat in 2010; I still think they will -- but now I'm not so sure.
And another thing: . I have two long-haul business trips coming up in early Spring and was planning to use BA, as I usually do. Not now. Too risky and there are enough risks flying these days -- security and weather -- not to add strikes as a third. I'll choose another carrier. So BA will loose two expensive business class tickets from me.
I'm sure it can survive the loss of my custom. But I am obviously not alone: across the globe business customers, the core of BA's revenues, must be making the same calculations. Even the threat of a strike is going to cost BA billions. In the current economic climate -- most airlines are bust and BA is on its knees -- even contemplating a strike will seem to many like suicide.
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