How could so many experts get it so badly wrong?

Yes, it was. The majority of City economists predicted that the broad measure of inflation, the Retail Prices Index, would drop into negative territory for the first time in 49 years. It did not. The narrow "official" yardstick, the Consumer Prices Index, was supposed to fall sharply from three per cent. It did not. It rose.

How could so many highly paid City experts and the Bank of England get it so wrong?

Very good question. It seems baffling, given that most of the raw data that goes into the inflation figure is "out there". The "teenage scribblers" of the Square Mile have clearly underestimated the impact that the collapse in the value of the pound is having on the cost of imported goods. But, when judged by the "ordinary person test" it does not seem so bizarre - food retailers have been talking for months about the sharply rising cost of their supplies, particularly meat and vegetables.

So is this a blip or a genuine return to raging inflation?

Those economists who misread it this month are adamant that it is a one-off and that deflation has merely been postponed, not cancelled. They say that the bombed-out state of the economy and soaring unemployment means prices will simply have to fall. But this will raise serious question marks over the Government's whole rescue strategy. If there is more inflation than thought, is it right to flood the banking system with money through quantitative easing?

So are shoppers still spending?

The great mystery of this recession is how well consumer spending has been holding up. It may be that after years of a consumer credit boom we are just so fixated on spending that many of those 94 per cent still in work cannot kick the habit. Although the high street has been hit hard, few well-known names that were not already in trouble have actually gone under. The supermarkets, in particular, have seen big increases in like-for-like sales and that has enabled them to pass higher costs through to consumers, despite their message that they are doing their bit for the hard-pressed shopper.

Is there a "worst-case scenario"?

Unfortunately yes. If inflation is proving harder to control than anyone thought, it raises the prospect of interest rates having to go up again much sooner than expected. Rates on government gilts rose sharply today, reflecting fears that interest rates will go up sooner and more sharply that thought. And with unemployment rising remorselessly towards three million, that is the last thing the economy needs. The Bank of England will be treading a very fine tightrope over the next 12 months.