THE Bank of England's strategy to control soaring inflation was condemned as an 'epic failure' today as it hit a 3-year-high.
Inflation rose to 5.2 per cent in September from 4.5 per cent driven by a jump in utility bills, as gas and electricity increased 13 per cent and 7.5 per cent respectively.
Thomas Paterson, Chief Economist at Gold Made Simple, said: "With today's numbers, inflation has reached an all-time high since CPI data began.
"This is the 22nd month in a row that the Bank has missed its government-mandated target of 2 per cent.
"Whatever external forces the Bank of England blames for the overshoot, the bottom line is that for all of 2011 it has created more than double the inflation the government has asked it to. By any standards, that's an epic failure.
"The credibility of the Bank is hanging by a thread. And what has been its response to missing its government-mandated inflation target for nearly two years? Its response has been to print more money — and not just a small amount but an expansion of the UK's already bloated balance sheet by almost a third."
Sir Mervyn King, governor of the Bank of England, which is tasked with keeping inflation down, is expected to mount a strong defence of the Bank's handling of the economic crisis in a keynote speech tonight.
Mr Paterson added: "But is the Bank's failure to stick to the inflation target really a failure? Our view is that the Bank of England has secretly given up on the 2 per cent target and is actively trying to achieve annual inflation of around 5 per cent -7 per cent.
"In doing so, its goal is to inflate away the UK's private and public debt by devaluing the pound. After all, if the Bank of England can hold CPI inflation at 7% for 10 years the value of the UK's debt will be cut in half.
"What puts this argument beyond doubt is the fact that, with the CPI more than double the target, the Bank has just printed another £75bn. However big the economic hole it is in, no rational policymaking entity would do that unless its agenda was to stimulate even more inflation.
"Inflation is simply tax by another word, but we are conditioned into thinking of it as an accident or just the way things are, rather than a deliberate tax that we can all see and measure.
"We believe high inflation is the unstated but unequivocal strategy of the Bank of England to reduce the UK's deficit and bring our economy back from the brink."
The rise meant a little good news for some, as pensioners will see the basic single state pension will increase by up to £276 a year while the joint state pension will increase by £441 a year.
The increase in state benefits will put more pressure on Chancellor George Osborne, who is battling to slash the nation's budget deficit, as unemployment hit a 17-year high of 2.57 million in the three months to August.
Millions will feel the squeeze as utility bills rise and the cost of living soars.
A Treasury spokesman said: "The Government is taking action to help consumers with current high costs, including cutting fuel duty and freezing council tax, and the Prime Minister met yesterday with energy suppliers to discuss how to bring down customers' energy bills."
The Bank said it increased its QE programme by £75 billion to £275 billion because, with economic conditions as they are, it expects inflation to drop below its 2% target in the medium term.