Mervyn King, Governor of the Bank of England, will, as predicted, be writing to the Chancellor to explain why inflation has hit 3.3% in May, 1.3% above the Government's target, and what it's planning to do about it. The first bit will fairly easy, but expect King to do a bit of pencil-chewing when it comes to the second. He has a choice. Kill the housing market and the wider economy with interest rate rises. Or let rampant inflation out of the bottle by keeping interest rates low. Best of luck. More here.

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