Two decades ago the British media coined the phrase "the wrong kind of snow" to caricature British Rail's excuses for weather-related travel disruption.

A less familiar concept is "the wrong kind of inflation". Yet that seems to be what is afflicting the British economy as George Osborne rises today to deliver his second Budget.

Yesterday's inflation figures were worse than expected. Food, fuel and clothing pushed the Consumer Prices Index for February up to 4.4% . Combined with virtually static wages and low interest rates, the effect is to squeeze further the already "squeezed middle".

It is also bad news for the Chancellor. Today Mr Osborne will make great play of the fact that recent tax income has been higher than expected and he will use the resultant wriggle room to present what may appear to be a Robin Hood budget. Well-trailed leaks suggest there will be small sweeteners for motorists, air passengers and low earners, as well as some closing of tax loopholes and a "Learjet levy" on private planes. However, in the medium term, government borrowing is set to increase because, as Robert Chote of the Office for Budget Responsibility (OBR) has observed, Britain has been hit by the wrong kind of inflation. Inflation usually increases tax revenue, without similar effects on public spending, shrinking the gap nicely. Not this time because wage freezes, unemployment and fear of redundancy mean demand is already wilting, squeezing prospective government tax income as well as household budgets. Meanwhile pensions and benefits, as well as index-linked government debt, will continue to rise with inflation.

Simultaneously, the OBR is having to reduce growth forecasts, suggesting unemployment may keep rising for the foreseeable future. Figures from the Institute for Fiscal Studies this week show that apart for the very richest, who are well able to cushion small cuts, the hardest hit sectors of society are pensioners, who can no longer find savings accounts that keep abreast of inflation, and the poorest, who are hit hardest by rising prices and service cuts and will suffer more cuts in benefits after 2012.

Mr Osborne continues to use the supposed threat of a sovereign debt crisis as a fig leaf for swingeing cuts but if this quarter's growth figures are as bad as the last lot, he will need to come up with a Plan B pretty quickly. Labour would be in a better position to argue for less aggressive budget-cutting if it had not spent months electing a new leader, allowing the Tories to embed the notion that Labour are "deficit deniers" and the mess is all their fault.

Should yesterday's inflation figures hasten a rise in Bank of England base rates? Arguably , the wrong kind of inflation for households and the government, is the right kind of inflation for Bank of England inaction. As Governor Mervyn King has said, a price-wage spiral looks unlikely . Pressure to raise interest rates to curb inflation is therefore, more than offset by the danger that this could threaten the fragile economic recovery.

Events in Japan and Libya add to the uncertainty and, as Andy Haldane of the Bank of England warns in The Herald today, we need to be alert to " a further lurch downwards" in the property market. All things considered, there is still a case for holding fire on interest rates. Meanwhile, the challenge for George Osborne today is to conjure up a strategy for real growth and jobs rather than merely scatter a few eye-catching sweeteners.