British consumers think that inflation has jumped to nearly 5 per cent as the spiralling cost of utilities and food begins to bite, official figures from the Bank of England show.

They said that inflation hit 4.9 per cent in May, up from 3.9 per cent in February. That is the highest figure recorded by the Bank's quarterly inflation survey, which started in November 1999, and far above the official inflation target of 2 per cent.

People expect inflation to remain high over the coming year, rising to 4.3 per cent, from a previous series high of 3.3 per cent in February. That has dented further hopes of an imminent rate cut by the Bank to help to boost the flagging economy as it reinforces the inflationary pressures that have dogged the Bank's monetary policy committee for months.

Vicky Redwood, of Capital Economics, the economic consultancy, said: “These figures will reinforce fears that the next move in interest rates could be up.” Howard Archer of Global Insight, another economic consultancy, said that the next rate move will be down, but the Bank's hands will be tied in the near future. “We suspect that November is now likely to be the earliest month for a cut unless the economy falls off a cliff in the summer.”

Nearly half of those surveyed by the Bank said they expected interest rates to rise over the next year, compared with 42 per cent in February. Only 17 per cent expected rates to fall.

While the retail price index, a measure of inflation that includes housing costs and council tax, is higher than the consumer prices index (CPI) at 4.2 per cent, there was concern that consumers feel that their personal rate of inflation is higher than this. Analysts said that high inflation expectations could spark a wage-price spiral, fuelling inflation even further.

“If people feel the rate of inflation is high, they will be more inclined to ask for wage increases,” Mr Archer said.

Wage settlements have remained largely steady so far this year as the spectre of job losses looms. Official figures released this week showed that average earnings growth fell to 3.2 per cent in April. “Employees might not have enough bargaining power. Unemployment is rising and firms are under pressure to keep a lid on non-energy costs,” Ms Redwood said.

The CPI is now 1 per cent higher than the target rate at 3 per cent. The Bank has forecast that it could rise as high as 4 per cent before the year end.

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