British companies are facing their greatest inflationary pressures since modern records began in 1986, reducing the Bank of England’s scope for more cuts in interest rates, figures from the Office for National Statistics revealed yesterday.

Input price inflation – the cost of materials to producers – surged to 18.9 per cent in the year in January, the strongest rate since the series began 22 years ago. In addition, the cost of goods from factories rose by its highest rate in January for more than 16 years and producer price inflation climbed 1 per cent on the month in January, taking the annual rate up to 5.7 per cent, from 5.0 per cent in December. Analysts had expected an annual reading of 5.1 per cent.

The Bank of England cut interest rates by a quarter-point last week to 5.25 per cent, the second such cut since December. Rising inflation has dampened expectations of more than one further quarter-point cut in rates during the first half of this year.

“These figures are unequivocally awful,” Philip Shaw, an economist at Investec, said.

Higher petrol and food prices pushed up producer output prices, but the core rate also rose, to 3.2 per cent from 2.7 per cent in December and 2.4 per cent in November, the fastest monthly increase since 1986. Analysts at Global Insight expect data tomorrow to show consumer price index (CPI) inflation rising to 2.3 per cent in January, up from 2.1 per cent in December.

— Connells, the estate agency, reported that mortgage approvals in January were the weakest since Bank of England records began in 1994.

Explore Economics

• Pre-Budget Report 2009

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive