UK's double-dose of bad news from inflation and trade gap

The Consumer Prices Index continued its march towards 5% - up from 4.4% to 4.5% - after stinging record price rises across the High Street as well as higher gas and electricity bills.

The UK's goods trade gap with the rest of the world also remained stuck at a stubbornly high £8.9 billion in July.

The double-dose of bad news sets a grim tone for a key week of economic data, with markets braced for disappointing jobs and retail sales figures ratching up pressure on the Bank of England for more money printing through quantitative easing.

The Bank's arch dove, Adam Posen, writing exclusively in the Evening Standard, called on his fellow rate setters on the monetary policy committee "to do more to fulfil our responsibility to the British people" with more quantitative easing.

Colin Ellis, chief economist at the British Venture Capital Association, said: "Household budgets are still under pressure from high inflation, and the much hoped-for rebalancing of the economy is happening far more slowly than policymakers expected."

Many experts are now forecasting a return to the printing presses as soon as next month despite the latest rise in the cost of living, which is more than double the Bank of England's 2% target.

The risks to the recovery from chaos in the eurozone are expected to sway the monetary policy committee into further action. Investec economist Philip Shaw - pencilling in an October move - said: "We should hit 5% before the end of the year but then inflation should fall sharply as this year's rise in VAT to 20% falls out of the figures."

Lloyds Bank Corporate Markets analyst David Page added: "We believe the likelihood of further QE is tied to the prospects for economic activity and will not be unduly constrained by headline inflation."

July's trade figures revealed imports still growing nearly twice as fast as exports over the month.

Export volumes rose 2% but were outpaced by a 3.8% rise in imports.

David Kern, chief economist at the British Chamber of Commerce, called for a "national export drive" to boost the UK's trade performance. He warned: "The growing problems facing the global economy, particularly the eurozone, presents UK exporters with major challenges.

"Unless we accelerate the pace at which exports increase, it will be difficult to sustain UK growth."