Bank of England's 'nerves' to be tested as inflation jumps most on record

The sharp rise in the annual rate of consumer price inflation from 1.9pc to 2.9pc was driven by exceptional events in December 2008, as the VAT cut and high street discounting at that point were not repeated last month.

An increase in the price of petrol and new cars also drove the Consumer Prices Index (CPI) up last month, the Office for National Statistics said. Economists had expected a smaller rise in CPI to 2.6pc.