Shock inflation jump puts paid to chances of a rate cut

The official measure of the cost of living, the Consumer Prices Index, jumped from 2.5 per cent to three per cent last month, way above City forecasts averaging 2.6 per cent.

The April rate is just below the level at which the Bank of England Governor Mervyn King has to write a "Dear Chancellor" letter to Alistair Darling explaining how he plans to bring inflation back to its two per cent target.

The damage was done mainly by rising gas and electricity bills, food prices - particularly of fruit, meat and bread - and increases in excise duties on alcohol. City economists described the inflation figure as "a horrible surprise" and said it was now almost inconceivable that the Bank of England will lower rates from five per cent when its Monetary Policy Committee meets next month.

George Buckley, chief UK economist at Deutsche Bank, said: "An interest rate cut in June is now off the table. The Bank of England will be sitting down in front of a set of data that includes these numbers. There is no new data between now and the next meeting."

The inflation figures are a major blow to Gordon Brown's hopes that the flagging economy will soon start to turn the corner from the slowdown induced by the credit crunch. Forecasters said inflation would move above three per cent next month and could stick there all summer.

The inflation figure completed a 24-hour barrage of bad economic news. Yesterday's figures on factory prices - the worst since 1986 - were followed by the worst High Street spending figures for three years, the gloomiest report on the housing market from chartered surveyors for 30 years and the lowest level of home lending since 1975.

Mr Buckley said: "I don't think I can ever remember such a large amount of poor data in such a short space of time."