Stubbornly high inflation is set to trigger another open letter from Bank of England Governor Mervyn King to the Chancellor later when July figures on the cost of living are published.
Experts predict the Bank's official Consumer Prices Index (CPI) benchmark will edge down marginally from 3.2 per cent to 3.1 per cent - but still well above the Bank's 2 per cent target.
January's VAT hike to 17.5 per cent as well as recent pressure from rising food costs has kept the CPI above 3 per cent throughout 2010, but annual wage growth has slowed to 1.3 per cent - squeezing households' real incomes.
The impact of the emergency Budget's forthcoming deficit-busting VAT rise to 20 per cent
will also keep inflation above the target throughout 2011, the Bank warned in its quarterly forecasts last week.
The Governor has to pen a letter when CPI has been more than one percentage point above or below 2 per cent for three months in a row. He has written seven so far since April 2007.
The Retail Prices Index (RPI) is also in focus as commuters brace themselves for more big price increases from next January.
