Soaring household energy bills sparked another sharp jump in inflation last month, worsening the Bank of England’s quandary over how to respond to conflicting pressures from rising price pressures and faltering growth.

A massive 10.5 per cent jump in the cost of gas and electricity pushed through by utilities groups lifted overall consumer prices by 0.7 per cent last month, driving their annual pace of increase to a nine-month high of 2.5 per cent, up from 2.2 per cent in January and far above the Bank’s 2.0 per cent target.

The steep increase in inflation was expected by the Bank and the City, after a change in policy by the Office for National Statistics that means such price rises are added to the figures all at once, rather than being phased in over several months, as in the past practice.

Amid continuing hopes that the Bank’s Monetary Policy Committee will cut interest again either next month, or in April, there was some reassurance for the MPC as yesterday’s anticipated surge in inflation was smaller than expected, thanks to the offsetting impact of an easing in rampant food price inflation.

The MPC’s anxieties will also be soothed as so-called “core inflation”, excluding volatile food and energy costs, dropped back last month to 1.2 per cent, its lowest rate since August 2006.

The annual rate of price gains for food and non-alcoholic drinks dropped back a little, to 5.6 per cent last month, from a heady 6.1 per cent in January.

But the good news was dampened by details showing that this was mainly due to a surprise fall in the cost of seasonal food, while non-seasonal food prices continued to rocket upwards, climbing at an annual pace of 7.4 per cent in February, the fastest for 10 years. The cost of cheese, milk and bread prices rose by 17.6 per cent, the largest rise since records began in 1997.

The MPC will welcome the decline in core inflation reported yesterday. This was mainly driven by slower increases in the cost of services, with inflation in the sector falling back from 3.3 per cent in January to 3.1 per cent last month, the lowest for 18 months.

In a bigger headache for the Bank, however, goods price inflation on the consumer price index accelerated to 1.9 per cent, from 1.3 per cent.

Hopes that the MPC will press ahead with an expected cut in borrowing costs in the next two months will be reinforced as yesterday’s figures confirmed that inflation is falling some way short of the Bank’s central forecast for the first quarter of the year (Q1).

Geoffrey Dicks, of RBS Global Banking, noted that the Bank’s forecasts called for average Q1 inflation of 2.53 per cent and that, for this to be met, inflation would have to accelerate to 3 per cent next month.

The Bank is set to remain on high alert over inflation risks, however, with the further increases in price pressures expected in coming months fuelling its worries that households and businesses will come to expect higher inflation, push up wages and prices, and make this a self-fulfilling prophecy.

Those concerns are heightened by the high level of inflation on the retai, prices index, closely followed by the public, which was stuck at 4.1 per cent in February for a second month.

The MPC’s inflation anxieties are being inflamed by record oil prices, now firmly above $100 a barrel, commodity prices at all-time highs, and recent steep drops in the pound, which raise Britain’s import bills.

On Monday, sterling’s trade-weighted index, which is closely tracked by the Bank, suffered its sharpest fall since September 1992, when Britain was ejected from the European exchange rate mechanism on Black Wednesday, and fell to levels close to the lowest in a decade.

The MPC’s headache has been made worse by the Chancellor’s big increases in alcohol duties announced in the Budget. Rises in tobacco and alcohol duties will add 0.17 percentage points to the inflation rate for March, and higher fuel duty will add another 0.1 percentage points in October.

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