Increases in the cost of gas and electricity pushed consumer price inflation to 5.2 per cent in September.
Inflation broke the five percent barrier last month, according to official figures. The consumer price index reached 5.2 percent in September, up from 4.7 percent in August, driven by rising gas and electricity costs. The retail prices index, which includes mortgages, also rose from 4.9 percent to five percent over the month.
Analysts expect the latest figures to signal an inflationary peak, with prices retreating thanks to falling oil prices and reduced economic activity. However, they believe inflation will remain well above the Bank of England's two per cent target until mid-2009 at least.
The release of the data comes after the monetary policy committee cut base rates by 0.5 percent, a day earlier than its scheduled monthly meeting. Members said the move was necessary to ward off a serious economic downturn.
However, so far mortgage lenders have failed to pass on the cut to borrowers, meaning consumer spending is likely to remain subdued as budgets are squeezed. According to economists this will serve to dilute inflationary pressures.
Data from the British Retail Consortium revealed that like-for-like sales on the high street fell by 1.5 percent in September - the sharpest drop since April and the sixth consecutive monthly decline.
