Inflation jumps above target level

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Bank of England cuts interest rates

The underlying rate of inflation has jumped to its highest level for more than two years, exceeding the Bank of England's target rate of 2.5 per cent.

August's underlying rate hit 2.6 per cent, up 0.4 per cent on last month. The big jump has been blamed on the price of petrol, which fell by less than last year, when prices at the pumps dropped sharply.

Poor growing conditions also pushed up the price of seasonal food, with costs up 10 per cent on last year.

However, experts warned against reading too much into the annnouncement, pointing out that a discrepancy of this kind had been expected.

The headline rate of inflation, which includes home loans, was up to 2.1 per cent from 1.6 per cent in July.