Inflation surged to 5.2 per cent during September as households were forced to cope with rising gas and electricity bills.

The Consumer Price Index (CPI) spiralled to more than two and half times the official 2 per cent target to reach the highest level since March 1992, up from 4.7 per cent last month.

However, many economists say today's sharp spike in inflation could mark the peak and forecast that it will start to fall back sharply in the coming months.

The wider RPI measure of inflation, which includes housing costs, rose to 5 per cent from 4.8 per cent in August.

State pensions, which are re-set this month, are pegged to the RPI - so single people receiving the basic state pension will see their weekly payments increase by £4.54 while pensioner couples will receive an extra £7.26.

However, Help the Aged, the charity, said this change was "too little, too late" as pensioners had been the worst affected by the recent surge in the price of food and fuel.

The main driver of September's increase came from gas and electricity bills. Gas prices were 16.6 per cent higher than in August, taking the annual increase to 49.9 per cent while electricity costs rose by 10.3 per cent, resulting in a 30.3 annual rise.

Mervyn Kohler, special adviser for Help the Aged, said: "Although five per cent is large by the standards of recent years, it totally fails to reflect the dramatic increases pensioners are facing in food and fuel.

“Research released last week showed that in reality, our oldest and poorest pensioners face an inflation rate of around nine per cent, far higher than the general rate of inflation."

Gordon Lishman, director general of Age Concern, said: "Although high, the official inflation rate simply does not reflect the reality facing millions of pensioners.

“The Government must respond to these exceptional times by introducing an emergency package of measures to help the most vulnerable pensioners through this winter.”

While fuel costs rose, there was some easing of grocery bills as food inflation fell from to 12.7 per cent from 14.5 per cent in August.

It is widely expected that inflation will start to fall very soon however. Jonathan Loynes, of Capital Economics, said: "The key issue now is just how far and fast it will drop back. Inflation should be back below 4 per cent by the end of the year."

The Bank of England, which has been highlighting the threat of mounting inflationary pressures for most of the year, also said it expects inflation to ease sharply.

Mr Loynes warned that deflation, when prices fall across the board, could be a possibility next year if oil prices keep tumbling at the current rate.

Policymakers, who have been concerned about rising prices for most of the year now believe that the biggest threat comes from the looming recession. The Bank of England, in a move co-ordinated with other central banks around the world, cut interest rates by half a percentage point last week in a bid to boost battered markets.

Andrew Sentance, a previously hawkish member of the MPC, said yesterday: "The severe stresses in the financial system over the last month and the downside news from the real economy have certainly increased the risks of a bigger and more sustained downturn."

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