Inflation hits four per cent after VAT rise

The rate of inflation jumped again last month to four per cent - the highest since November 2008.

The new year rise in VAT to 20 per cent, combined with record petrol prices, helped accelerate the rise in the cost of living.

The headline Consumer Prices Index (CPI) measure of inflation is now twice the Government's two per cent target, with the price of food and drink rising at 6.3 per cent a year.

Although the figures were not as bad as the City had feared, the steady increase in the rate of inflation will add to concerns that the Bank of England will have to raise interest rates within months.

However, some economists have urged it to hold back or risk snuffing out the recovery.

David Kern, chief economist at the British Chambers of Commerce, said that a "premature hike" would make no short-term difference to inflation "but would put the recovery at risk".