Petrol price rise helps to drive inflation above 2 per cent target

Inflation rose unexpectedly quickly to 2.1 per cent in October, official figures revealed yesterday, moving above the Government's 2 per cent target rate for the first time in four months.

A sharp rise in the cost of petrol was the chief driver behind the increase, with the cost of a litre increasing by 2.7p last month after a rise in the oil price and the introduction of a 2p rise in fuel duty.

Higher food prices also played a part in pushing inflation above the target levels, with higher air fares, particularly on European travel, a further contributory factor.

The rise, from 1.8 per cent in September, surprised economists who had expected a much more modest increase in the consumer price index (CPI). The retail price index also rose sharply last month, from 3.9 per cent in September to 4.2 per cent.

The increase will disappoint those who have been pushing for the Bank of England's Monetary Policy Committee to reduce interest rates amid fears that the global credit crisis might cause an economic slowdown.

Jonathan Loynes, an economist at Capital Economics, said: "October's UK CPI figures will heighten the growing dilemma for the MPC posed by slowing activity on the one hand and lingering inflation concerns on the other."

Howard Archer, chief UK and European economist at Global Insight, added: "We suspect that the Bank of England will not trim interest rates until February unless there are very clear signs over the next few weeks that the economy is slowing sharply."

Yesterday's data followed worrying figures published on Monday suggesting that factory gate prices – the prices charged by manufacturers – are increasing at their fastest rate for 12 years.

The Bank of England is due to publish its latest quarterly Inflation Report today, but has already warned that it intends to keep a tight leash on inflation. Charles Bean, the Bank's chief economist, warned last week that it "cannot afford to relax on the inflation front".

The Inflation Report should provide further clues on where the Bank expects inflation to head over the coming months. Yesterday's figures showed falling utility bills were the chief downward pressure on inflation last month.