Gordon Brown’s inflation target of 2% could cost 60,000 jobs, according to a report.

The report by the Ernst & Young ITEM Club urged the chancellor Alistair Darling to exclude food and energy be excluded from the inflation target.

Peter Spencer, chief economic adviser to the ITEM Club, told The Guardian that food and energy contributed 1.7 percentage points to inflation as measured by the consumer prices index and that to hit target interest rates would need to remain high. This would result in a 0.75% point cut in GDP and a 60,000 increase in unemployment.