The late Peter Shore, a former Labour minister, wrote in 2000 of the “almost paranoid fears of inflation when the emerging global problem ... is clearly the old enemy deflation”. It turns out that fears of the resurgence of inflation were not so paranoid after all.

Driven by soaring food and energy prices, the annual rate of consumer price inflation rose to 4.4 per cent in July. Though the price of oil has fallen since this data was collected, inflation is likely to be driven still higher by increases in utility charges.

Inflation is now running at more than twice the Government's target rate of 2 per cent. The Bank of England has responsibility for meeting that target. There is thus scant prospect of a cut in interest rates in the near future, despite a slowing economy and a collapsing housing market.

In these circumstances, there are urgent calls for a change in the framework of monetary policy. To accede to them would be a grave error.

Inflation targeting has proved a successful instrument of economic management in various advanced industrial economies, under governments of differing political philosophies. It was adopted in the UK in 1992 by the Conservative Government after sterling's exit from the European Exchange Rate Mechanism. For a government whose economic policy had just been destroyed by the financial markets, it was sensible to aim to strengthen the credibility of monetary policy and restore a nominal anchor.

Inflation in the 1990s tended to be weaker than financial markets had expected, owing partly to the effect of imports from China. These disinflationary pressures (that is, a fall in the rate of inflation) made it easier for policymakers to meet the inflation target. When Labour took office in 1997, the Bank of England was given full operational independence to meet the inflation target set by the Government.

That system is now being sorely tested. With high food, energy and utility prices, living standards will suffer if the Bank moves quickly to meet an inflation target of 2 per cent. Possible policy responses would be to ease the target; to choose another measure of inflation as the target (such as core inflation, which excludes the effect of food and energy prices); to allow the Bank flexibility on the timescale over which it should meet the target; or to consign the entire philosophy of inflation targeting to the history books of abandoned economic nostrums, such as the gold standard. All these policy approaches would be mistaken.

It is true that the inflationary pressures arising from food and energy prices are global. But an inflation target takes account of the cost of living. Consumers pay for food and petrol; the target ought to incorporate those elements. And there is no easy way of damping down excess inflationary pressures.

There is, on the contrary, a painful lesson of history. If expectations of high and rising inflation are incorporated in the decisions of consumers and businesses, then it will be far more difficult to control inflation in the longer term. Labour's reputation for economic management has been tarnished by an unsustainable credit boom and lax fiscal policy. The credibility of monetary policy is also the credibility of the Government. It must not yield on this issue.