CPI inflation was stable at 3.1% in September but may rise towards 4% over coming months, reflecting surging commodity prices and the VAT hike. This would squeeze consumer budgets, thereby increasing the risk of a "double dip", while making it difficult for the MPC to launch QE2. There is a strong case for postponing the VAT increase until external inflationary pressures ease.

Key factors suggesting a rise in inflation include:

• VAT pass-through. The planned hike in the standard rate from 17.5% to 20% in January 2011 follows a rise from 15% this January so might be expected to have little impact on annual inflation. The Bank of England's regional agents' survey, however, suggests that most firms plan to pass on the increase in full, in contrast to the 2010 rise (which was a reversal of a temporary reduction). Assuming that pass-through was 50% this year and will be 90% for the coming hike, the annual CPI rate would be boosted by 0.6 percentage points.

• Food prices. A post a month ago suggested that CPI food inflation would rise to an annual 7% but a further substantial increase in commodity prices in recent weeks could result in a move to 10% (below the 14.5% peak reached in 2008). From 4.9% in September, this would add 0.5 percentage points to headline inflation, given food's 9.6% weight. Additional upward effects are possible via the beverages and catering services CPI components.

• Household gas bills. Ofgem recently estimated that energy suppliers' gas purchase costs would increase by 13% by next spring, based on higher forward prices. The impact on household gas bills is unclear but a 10% rise, in contrast to a 5.7% cut over the last year, would add 0.4 percentage points to annual CPI inflation, given a 2.5% weight.

• Motor fuel prices. Fuel cost inflation has fallen significantly since the spring and should decline further as price hikes in late 2009 and early 2010 drop out of the annual comparison. Pressures are reemerging, however, with a recent rise in wholesale costs, on top of this month's duty increase, suggesting that a litre of unleaded will return to about £1.20, from £1.15 in September. Fuel inflation, therefore, will subtract less than previously expected from the headline CPI rate – an estimated 0.3 percentage points by early 2011.

In combination, these factors imply a boost of 1 percentage point or more to annual CPI inflation by early next year. A rise, therefore, looks inevitable, even assuming some slowdown in other CPI components.

One further point: CPI inflation continues to be suppressed by a suspiciously-low estimate of clothing and footwear price rises. While the RPI clothing and footwear index rose by an annual 9.4% in September, the corresponding CPI increase was just 0.9% – National Statistics, in effect, assumes that consumers are so expert at shopping around that they are able to buy the same volume for just 0.9% more than a year ago despite a 9.4% increase in label prices.