A FURTHER jump in the cost of living was being revealed today with official figures set to show inflation at close to 3%.

The Consumer Prices Index (CPI) for December was known to the Bank of England before it made its shock decision last Thursday to raise interest rates to 5.25%.

If inflation exceeds 3% - one percentage point or more above the 2% target rate - Bank of England Governor Mervyn King would be forced to write an explanatory open letter to the Government for the first time since being granted independence in 1997.

Inflation reached a 10-year high of 2.7% in November, the seventh consecutive month it was above the 2% target.

And early predictions suggested it could nudge up to at least 2.8% in December.

But the Monetary Policy Committee's surprise quarter point base rate rise last week was seen as a sign that inflation had surged even more than expected.

Any letter from Mr King would need to detail why inflation had moved away from the target and what policy action was being taken to move it back in line with the 2% goal.