Britain's inflation rate rose more than expected in May to its highest since the Labour government came to power in 1997 and the Bank of England will now have to explain how it will bring prices back under control.
The Office for National Statistics said today that consumer prices rose 0.6 per cent last month, taking the annual rate up to 3.3 per cent from 3 per cent in April.
Analysts had expected a reading of 3.2 per cent and May's figure is the highest since the series began in 1997.
"Everything looks strong: services, goods, food, utilities. (This) highlights the severity of inflation pressures hitting the UK," said Michael Saunders, economist at Citi.
He expects a Bank of England letter "to suggest upside risks to inflation have increased since the May Inflation Report, but without committing to a rate hike".
Short sterling and gilt futures initially fell on the headline figure and sterling rose against the dollar. However the moves were quickly reversed and analysts said the market was now fully aware of the deteriorating economy - and taking the view higher inflation may not mean higher rates.
Under the BoE's remit, Governor Mervyn King has to write an open letter to the government if inflation deviates more than one percentage point away from the official two percent target.
This has only happened once before - last April - since the BoE was given control of interest rates 11 years ago.
"It probably means that there's a risk of inflation rising to 4 per cent later this year and the Bank will have to write a number of open letters, unlike in April 2007. This is certainly more serious now," said George Buckley, economist at Deutsche Bank.
The BoE has been expecting the inflation rise. It forecast last month that inflation could rise near to 4 per cent.
Its policy direction is likely to be guided by the outlook for inflation over a two-year horizon, especially as a slowing economy is expected to tame price pressures.
Mr King's letter will likely blame soaring food and fuel prices which are rising across the world and over which policymakers have little control.
Food and non-alcoholic beverages added 0.14 percentage points to May's annual rate - the largest contribution. Housing and household services added 0.09 percentage points as utility bills rose.