“We can be confident about the inflation outlook, there will be no return to the inflation rates of the early 1990s,” says the Chancellor in his first Budget speech.

As a result of increasing world fuel, energy and food prices, inflation in the UK will rise in the short term, but Chancellor Alistair Darling is confident that it will return to target in 2009.

In his first Budget speech, he said, ‘Energy prices have tripled since 2002, but over this period inflation has averaged just two per cent and growth has averaged 2.75 per cent.

‘I am today writing to the Governor of the Bank of England to re-confirm that the inflation target for the Monetary Policy Committee remains two per cent on a CPI basis - entrenching our commitment to low inflation.’