Britain's underlying inflation rate unexpectedly shot above the Bank of England's 2.5 per cent target level in August for the first time in over two years, according to official data.
But economists said the rise was only temporary and would not stand in the way of further interest rate cuts from the Bank of England (BoE).
Speculation is rife a BoE rate cut could come any day after the United States Federal Reserve and European Central Bank both lopped half a point off their key lending rates on yesterday in the wake of last week's terror attacks in the US.
National Statistics (NS) reported RPIX, which excludes volatile home loan payments, jumped by 0.4 per cent in August to give an annual inflation rate of 2.6 per cent, well above the 2.4 per cent average forecast from City economists and the highest since March 1999.
The headline all-items inflation rate rose to 2.1 per cent from 1.6 percent in July, the highest since March. The measure that excludes home loans and indirect taxes, known as RPIY, leapt to 3.1 per cent, the strongest since September 1993.
NS said the main reasons for the rise were that last year's steep fall in petrol prices was not repeated this year and that car prices are now stable whereas last year they were falling.