Read Mervyn King's letter to the Chancellor

Britain has fought off deflation for another month as the Retail Price Index (RPI) measure of inflation fell by less than expected, declining from an annual rate of 0.1 per cent to just 0 per cent, it was announced this morning.

The Consumer Price Index (CPI) gauge of inflation unexpectedly rose, however, to 3.2 per cent, forcing Mervyn King, the Bank of England's Governor, to write another letter to the Chancellor to explain why inflation is so far above the 2 per cent target.

CPI was up from 3 per cent in January, confounding expectations that it was set to tumble after falling sharply from a peak of 5.2 per cent in September. Official figures reveal that consumer prices were driven up by rising food costs, which observers blamed on the weakness of the pound.

Food prices rose by 1.7 per cent during February, taking the annual increase to 11.5 per cent. Vegetables were the biggest culprits, rising in price by nearly 19 per cent over the year.

Core inflation, which excludes volatile food and energy prices, also rose, from 1.3 per cent to 1.6 per cent.

"This could suggest that the fall in sterling is working its way through to the high street," Vicky Redwood, UK economist at Capital Economics, said.

In his letter to the Chancellor, Mr King also indicated that the weakening pound has contributed to the rise in inflation as imported goods have become more expensive.

"February's inflation outturn is somewhat higher than expected. This could reflect pass-though of the exchange rate depreciation to consumer prices since much of the strength of the outturn appears to be concentrated in components where a large share of goods are imported," he wrote.

But news of the rise in inflation pushed the pound higher against the dollar. The gains were cemented as Mr King told MPs this morning that he did not expect sterling to fall much more. The pound rose by more than 1.2 per cent to $1.47 dollars and by 1.8 per cent to 1.09 euros in morning trading.

Economists had expected RPI inflation, which includes housing costs, to fall into negative territory, plunging the country into deflation for the first time in 50 years.

Today's figures emerged as Mr King gave evidence to the Treasury Select Committee about the Bank's inflation forecasts this morning.

The Bank's forecasts show a sharp drop in inflation, with CPI falling to near zero and staying there until at least 2011. Mr King also said in his letter that CPI inflation is still set to fall below the 2 per cent target.

Analysts also expect further falls in prices. "The big picture remains that deflation is on its way. After all, at zero in February, the RPI measure was as close to deflation as you can get," Ms Redwood said.

The Office for National Statistics said that the cost of toys, games and hobbies also jumped during the month, rising by 2.5 per cent, although they were slightly less expensive than February last year.

Transport costs also contributed to the spike in CPI, rising by 11.4 per cent over the year.

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