Higher petrol prices pushed Britain's inflation rate further above target in September, data showed today.
But the rise was less than expected and calmed some concerns that inflation will accelerate further.
The Office for National Statistics said consumer prices rose 0.2 per cent on the month, pushing up the annual rate to 2.5 per cent, up from 2.4 per cent in August and the highest rate since comparable records began in 1997.
Although that was the third consecutive month that inflation has been above the Bank of England's 2 per cent target, it was lower than the 2.7 per cent that analysts had predicted.
Short sterling interest rate futures rallied on the figures while the pound fell 1/5-cent against the dollar on the perception that inflation may be less of a barrier to a possible Bank of England interest rate cut in coming months.
Bank of England deputy governor Rachel Lomax said yesterday that she expected inflation to remain above target in the next few months, even if oil prices don't rise further.
A rise in petrol prices of over 4.6 pence per litre in September compared with a rise of just 0.1 pence a year earlier was to blame for the rise in inflation, the ONS said. Fuels and lubricants had contributed 0.14 percentage point to the overall rise in CPI.
Downward effects on inflation came from clothing and footwear, particularly women's and children's outerwear