Inflation is falling at a slower rate than anticipated, prompting fears that interest rates might start rising sooner rather than later.

News that inflation remained at a stubbornly high 2.2% last month - against 2.3% in April - sent the pound to a year high, up more than a cent against the dollar to $1.645.

Foreign exchange dealers said the rise in sterling came on the back of an expectation that UK interest rates might start rising from their current record lows of 0.5%.

The consumer price index still being up year-on year was said to be the fault of the Chancellor's Budget duty hikes on alcohol and tobacco in April and the re-emergence of £1 a litre at the petrol pump after a doubling of oil prices over the last six months.

Economists are expecting CPI to fall maybe to below the Bank of England's target of 2%. Howard Archer of Global Insight said: "Even if the current improvement in economic activity is sustained, growth will not be strong enough for some considerable time to lift underlying inflationary pressures."

James Knightley at ING said: "We remain fairly relaxed about the perceived threat of a rise in inflation given the lack of credit in the economy. We suggest that consumer spending will remain subdued for a prolonged period and inflation will soon break below 2% and stay there until late 2011."