Inflation soars to 3% in April

The cost of living surged to its fastest rate for almost six years during April, official figures have shown.

The 0.5 per cent rise in the Consumer Prices Index (CPI) to 3 per cent is the biggest monthly jump since July 2002.

It follows surging gas and electricity bills, food prices, and Budget tax hikes on alcohol and tobacco.

The gloomy figure is far higher than the 2.6 per cent expected by City economists.

Interest rate-setters on the Bank of England's Monetary Policy Committee (MPC) had access to the CPI figure during their deliberations last week, explaining their decision to leave borrowing costs unchanged at 5 per cent.

But the sudden spike in inflation lessens the prospects of further rate cuts to ease the pressure on homeowners and borrowers.

The Office for National Statistics (ONS) data showed soaring gas and electricity bills adding nearly 0.2 per cent to CPI after a swathe of price hikes from the "big six" power companies earlier this year.

This had a bigger effect on the inflation figures in April as it compares with falling bills last year. And British Gas parent Centrica on Monday hinted at more price increases to come.

Seven of the 12 categories of goods measured by the CPI showed price increases on the previous month, including alcohol and tobacco after Chancellor Alistair Darling's Budget tax-grabs.

There was also pain at the supermarket with big rises in bread, cereals, meat and fish adding more than 0.1 per cent to the CPI, while mortgage arrangement fees were on the rise this year compared with falls seen 12 months earlier.

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