UK inflation fell by much less than expected in May, lengthening the odds of full-blown deflation, official figures revealed today.

The consumer prices index (CPI) measure of inflation, the Bank of England's target measure, dropped to 2.2 per cent from 2.3 per cent. Analysts had expected a fall to 1.9 per cent. This is the 20th consecutive month it has been above the Bank's 2 per cent target.

The alternative retail prices index (RPI) inflation measure, which includes housing costs and upon which many pay deals are based, has already plunged into deflationary territory. But it delivered another surprise, edging up from -1.2 to -1.1 per cent last month on the back of rising mortgage rates, confounding economists' expectations of a further drop to -1.5 per cent.

In another sign that prices are rising, core inflation, which strips out volatile energy and food costs, also rose from 1.5 per cent to 1.6 per cent.

Colin Ellis, European economist at Daiwa Securities, said: "Today's data is yet another upside inflation surprise - the latest in a lengthening line of releases that are forcing us to re-evaluate just how severe the risk of broad deflation in the UK is."

The increased price of cigarettes and alcohol, which rose as part of April's budget, helped to push inflation upwards, the Office for National Statistics said, but significant increases came from the rising cost of DVDs, televisions, clothing and footwear - indicating that sterling's weakness is filtering through as foreign-made goods become more expensive.

However, policymakers and analysts still expect inflation to fall sharply over the coming months.

Mr Ellis added that as unemployment continued to rise, forcing demand to drop, deflation could once again become a threat. "Sterling may just have postponed the downside inflation risks, rather than killing them off altogether," he said.

Jonathan Loynes, European and UK economist at Capital Economics, said: "We still think that core inflation will fall sharply over the next year or so in response to the general weakness of demand and opening up of a large amount of spare capacity. We still see scope for inflation to drop a fair bit further – to 1 per cent or less - by the late summer."

Sterling jumped by 0.6 per cent against the dollar to $1.6414 after the figures were released, and rose to the highest level this year against the euro, which fell to 84.44 pence against the pound.

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