George Osborne: 'Inflation is a challenge'

The latest figures on the cost of living show prices rising at their fastest rate for more than two years.

The inflation figure for January shows the consumer prices index rose to 4% which is double the Bank of England's target rate adding to pressure on the Bank of England to put up interest rates.

The Chancellor has admitted that inflation is "a challenge" but he said that cutting the deficit was the best way to help the Bank of England keep it under control.

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