Money Central: the 10 items that have fallen in price the most this year

The soaring cost of fuel and food triggered the sharpest jump in inflation for nearly six years last month, sending its headline annual rate to 3 per cent in a blow to hopes for more cuts in interest rates.

Mervyn King, the Governor of the Bank of England, is expected to take a hard line today on the inflation threat facing the economy - and to pour cold water on prospects for further rate cuts - when he discloses the Bank's latest quarterly forecasts.

Yesterday's jump in inflation left it a fraction below the 3.1 per cent level that would force Mr King to write an embarrassing explanatory letter to the Chancellor, detailing how the Bank is tackling the problem, as he had to do in March last year.

With inflation set to rise again next month, triggering the much-predicted letter to Alistair Darling, economists said that a cut in base rates next month, previously seen as odds-on, was now all but off the table.

Despite mounting gloom over economic prospects and growing signs that a sharp downturn in taking hold, with high street sales on the slide and house prices tumbling, some economists also sounded warnings that rates could be kept on hold for the rest of this year.

The much worse than expected inflation figures showed that inflation on the consumer prices index (CPI) shot up in April by half a percentage point from its March rate of 2.5 per cent, climbing to its highest level for a year at 3 per cent.

The City had predicted a far more modest increase in the headline inflation rate on the CPI, to only 2.6percent.

The much bigger surge in price pressures that emerged yesterday aggravates the dilemma confronting the Bank's rate-setting Monetary Policy Committee (MPC) as its wrestles with conflicting challenges from rising price pressures and weakening growth.

The MPC is expected to take a grim view of prospects in the Bank's quarterly Inflation Report today, raising its forecasts for inflation in the next 18months, even as it downgrades its assessment of the outlook for growth.

Utilities bills were the biggest driving force behind the sharp rise in inflation, as the cost of both electricity and gas jumped by 2percent last month alone, accounting for two fifths of the increase in the pace of price increases.

Households' costs for gas, electricity and water have jumped by 5.4percent since April last year, and yesterday there were warnings from Centrica, the parent company of British Gas, of more pain to come.

Food bills are also climbing rapidly, with prices up by 1.3 per cent last month alone, and up 7.2 per cent in the past year, breaking records for the CPI, which began in 1997.

There was some relief for consumers as the inflation figures also suggested that intensifying high street competition was capping price pressures for some products.

Clothing prices fell last month, leaving them falling at an annual pace of 6.3percent, the fastest rate of decline since December 2002.

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