Energy costs push rate of inflation over 5 per cent

The Consumer Prices Index of inflation breached 5 per cent in September, putting a further dent in the living standards of families across Britain. The latest figures from the Office for National Statistics released yesterday showed that CPI rose from 4.5 per cent in August to 5.2 per cent last month, to reach its highest level since September 2008. The Retail Prices Index, which includes mortgage costs, rose from 5.2 per cent to 5.6 per cent.

The ONS said that the price rises were mainly driven by soaring domestic energy costs. The average gas bill was up 13 per cent in August and electricity was up by 7.5 per cent. The price of food and clothing was also higher on the month.

Policymakers at the Bank of England had anticipated CPI breaking through 5 per cent this autumn, but most private sector analysts were taken by surprise by the size of the September increase. The Governor of the Bank of England, Sir Mervyn King, speaking in Liverpool yesterday, stuck to the Bank's forecast that prices will fall dramatically next year as global fuel prices come down. But upward pressures on prices are likely to linger in the coming months, not least because energy companies have not yet implemented all their announced tariff rises.

Some commentators accused the Government of turning a blind eye to the impact of high inflation.