Inflation rates 'highest since 2008'

Official figures have shown that UK inflation accelerated again last month to its highest level in 17 months.

Inflation hit 3.7% on the Consumer Prices Index (CPI) measure, exceeding the 2% target marking the highest rate recorded since November 2008.

The rate of inflation was also up on the Retail Prices Index (RPI) measure, which includes housing costs, to the highest rate in 19 years at 5.3%.

The RPI measure is often used to determine the levels of pay rises or pension payments.

According to the Office for National Statistics (ONS), the cost of food in particular saw sharp rises, up by 2.6% - mainly as a result of rising transport costs over the last 12 months.

The ONS added that fuel costs rose by over 25% in that time.

The increase in duty on cigarettes and alcohol which was introduced in April's Budget added to inflation, the ONS added, and the cost of clothing also increased.

Bank of England governor Mervyn King wrote a letter of explanation to the new Chancellor, George Osborne, as the official CPI measure remains over one percentage point higher than the original 2% target.

Hetal Mehta, senior economic adviser to the Ernst & Young Item Club said: "We do not expect the Bank of England to increase interest rates this year in response to what is a short-term pick up in inflation".

Chief economist at IHS Global Insight - Howard Archer, said he expected inflation to instantly begin falling again.

"April's consumer price inflation rate of 3.7% should mark the peak," he said.

"Inflation is expected to start heading down in the near term as temporary upward pressures start to unwind."

The low interest rates offered on savings accounts are likely to continue frustrating savers.