Taxing us into recession
"The higher level of energy and food prices is a genuine reduction in our standard of living relative to where it would otherwise have been," he said.
"This is because of the higher prices that all of us are having to pay."
Inflation has risen to a seven-month high, according to official figures, driven by significant increases in petrol and food prices.
Fuel inflation is running at 19.3 per cent, the highest since records began in January 1997.
Ruth Lea, an economic adviser at Arbuthnot Banking Group, said the Governor's warning underlined the plight facing many families.
"Quite simply, we are getting less bangs for our buck," she said. "Our standard of living is falling. Our incomes are not going as far.
"For a large number of people, the cost of living is not rising at two per cent — it is increasing at close to six per cent or seven per cent. Then on top of that you have taxes digging into their incomes — particularly council tax."
She said that when new tax rates take effect in April — with the lowest 10p rate being removed — those who were feeling the worst effects of price increases would be "clobbered again".
It is time to apportion blame. Petrol price at the pump is 2/3rd tax, food prices are driven a bit by China wanting to eat wheat but largely by the biofuel decrees and the CAP and the tax increases are driven by the bloated and wasteful Brownian government. He will try and blame Global problems but a combination of his imprudence and the EU are the the real cause. Luckily he has the sacraficial Darling to take the blame this year so he can Balls up the Chancellorship for the next election - but if he thinks that will work he is dreaming.