Men of letters II
More letters today - this time between the Bank of England governor and the chancellor.
Both men are fairly relaxed about the jump in the target measure of inflation to 3.5%. It is probably a blip - but an unwelcome one all the same.
I would make three key points about today's figures.
The first is that, for once, the headline figure did not come as a surprise: the 3.5% rise is more or less what the analysts expected.
That's good news, because there have been so many "upside" surprises on prices in the past year, economists had started to worry that the trade-off between growth and inflation might have gotten worse.
There's still plenty of room to worry about the amount of spare capacity in the economy, and about whether the UK will be able to grow as quickly in the future as we did before.
But these figures don't provide much additional reason to fret.
There was a record monthly change in the Consumer Prices Index (CPI) between December and January (it actually fell, as you'd expect after Christmas, but by a record small amount, if that makes any sense).
But year-on-year, the core inflation measure - excluding food and energy - rose by much less than the headline rate, from 2.8% to 3.1%. The CPIY measure, which excludes VAT and other indirect taxes, actually fell from 2.8% to 1.9%.
It's far too soon to say whether higher import prices and the rising cost of energy will cause more lasting inflationary pressure in the economy. But it's pretty hard to spot right now. Especially when you consider what's happened to wages in the past year.
That's point number two: this short-term bump in inflation is going to be hit many workers harder than usual, because earnings growth is already weak to non-existent.
Though the annual rate has jumped up to 3.5%, that only tells you the change in prices between last January and today.
To get a sense of true rise in the cost of living you need to look at the average over the course of the year. Overall, the CPI measure of prices rose by 2.2% in 2009. The average forecast for 2010 is 2.6%.
So the hit to our cost of living is not quite as bad as it first looks. But it's bad enough, when you consider that average earnings grew by only 1% in 2009.
Two years ago, earnings were growing by about 4% (though in 2008, you'll remember, inflation averaged 3.6%).
In the private sector, earnings barely grew at all in 2009. As I've said before, workers' willingness to accept flat or falling earnings has played a massive role in the smaller than expected rise in unemployment in the past year.
At the Bank of England, some worry that big paydays in the financial sector - like today's, at Barclays - will distort the average earnings figures in the next few months, especially for the public sector, where so many bank employees now technically work.
If you work for a bank that is majority-owned by the government, you're now included in the public sector.
Aside from making big profits, many banks are responding to public outrage about bonuses, by bumping up employees' basic pay instead.
That could push the headline "average earnings" figure up in the first half of this year, while telling you very little about the going rate of pay increases in the economy as a whole.
If the rest of us started demanding bigger pay rises to catch up with the likes of Barclays, the Bank of England could be in trouble. But there's little sign of that yet. Quite the opposite.
So this is likely to be a short-term bump, like the other two occasions that the governor has had to take pen to paper.
But my third point would be that the Bank still has reason to be nervous about this jump in the CPI, even if the rise in prices does not become entrenched.
That's because this month's return of VAT to 17.5% may not be the last "temporary distortion" the Monetary Policy Committee has to deal with in 2010.
Many expect a VAT rise to be on the agenda after the election - especially if the Conservatives win. Depending on the state of the economy, the next government could pre-announce a VAT hike to come in next year.
But if it were implemented immediately, it would push up the headline inflation rate again, just as the last blip was still working through the system.
This is going to be a very delicate time for the Bank of England: managing the exit from quantitative easing, and reassuring the markets that they have not let inflation get out of hand.
Even if it is another blip - and underlying inflationary pressures are well under control - another year of policy-induced "blips" is not going to make that job any easier.