Britain’s battered economy suffered a fresh body-blow today as rocketing gas and electricity bills sent the rate of inflation soaring to 4.7 per cent.Rising energy costs contributed nearly all of the increase in the official rate of inflation, with electricity prices up by 18 per cent year on year and gas rocketing by 27.7 per cent.
The figures were released as the dramatic collapse of US investment bank Lehman Brothers continued to cause turmoil on stock markets.
London’s leading share index opened with a hefty fall of more than one per cent, following a four per cent drop yesterday which forced the Bank of England to pump an extra £5 billion into panicked money markets.
Bank Governor Mervyn King will today write an open letter to the Chancellor to explain the latest increase in inflation.
Mr King is forced to write a letter every three months if the Consumer Prices Index - the Government’s preferred measure of inflation - remains more than one per cent above the Bank’s two per cent target.
CPI hit 4.7 per cent in August, up from 4.4 per cent in July.
There was also some upward pressure from higher food prices, but the Office of National Statistics said falling vehicle fuel prices helped offset the rise.
Oil prices have eased back dramatically from the 147 US dollar-a-barrel record seen in July, with light, sweet crude yesterday dropping to below 100 dollars.
Chancellor Alistair Darling said: “Inevitably there is bound to be turbulence, there’s bound to be a bit of uncertainty.”
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