Brown: redefining inflation target

Government Accused of "Relaxing' Inflation Target

The Bank has been told it must achieve the inflation target of two-and-a-half per cent which was set by the Conservatives. The Bank will have to account for its actions if inflation shoots over, or under, the target by more than one per cent.

The aim is to keep the public informed of what has happened and what measures are planned to get inflation back on target.

But the measure was attacked by the opposition, saying it masked a 'loosening' of the criteria for controlling inflation.

The Tories and Liberal Democrats say the decision amounts to a slackening of the target to three and a half per cent.

Clarke: Attacked change

Clarke: discussing the Chancellor's plans on Radio 4's The World Tonight

The decision comes as Labour kept on track with its inflation target in the first month since it swept to power.

The annual rate of inflation went up to 2.6% in May compared with 2.4% in April. But the government's target rate, which excludes mortgage rates, stayed steady at 2.5%.

According to the Office of National Statistice (ONS), housing costs were the chief factor behind the rise in the headline rate. In May, house prices rose. In addition, last years' mortgage rate cuts are no longer a factor in these figures.

A rise in both the prices and sales of alcoholic drinks, particularly lager and cider, was another factor behind the headline rate increase. However, the drop in the price of motoring and household goods put a brake on a further rise.

Analyst Simon Briscoe Of Nikko Europe said the new tighter accountability overshadowed the inflation figures.

He echoed comments by the Shadow Chancellor Kenneth Clarke that the new spot target and 1% either side "safety zone" was a slackening of policy.

"The apparently strict monetary policy regime that was unveiled a month ago is now being diluted," said Mr Briscoe.

Further details of the Government's monetary strategy are expected in the Chancellor's speech to business leaders at the Mansion House in the City later, where another talking point will be Mr Brown's choice of outfit since he has spurned the traditional black tie dress code and will instead wear a lounge suit.