Food & Energy Prices Push Index to 16 Year High

Dearer energy and food bills sent Britain's annual inflation rate to a 16-year high at 4.7% last month but Mervyn King, the Bank of England's governor, said inflation was close to its peak as oil prices fall.

The increase from 4.4% in July left inflation at more than double the government's 2% target and forced King to write an explanatory letter to Alistair Darling.

In that letter King said inflation would soon peak at about 5% and then fall back, but he cautioned it could remain above 2% until well into next year because of the recent fall in the pound's value which might push up import prices.

Despite the fall in oil prices, the Office for National Statistics said that increases in the cost of energy had pushed up household utility bills, adding 0.3 points to the inflation rate as measured by the consumer prices index.

CPI inflation has more than doubled since the start of the year, when it stood at 2.2%, and has been above the government's target in every month since May.

The ONS said the so-called core measure of inflation - which strips out housing, energy and food prices - had continued to rise and now stood at 2%.