In the largest increase since July 2002, annual inflation in the UK has risen to 3% from March’s figure of 2.5%.

In April, the Consumer Price Index (CPI) hit 3%, its highest point for 13 months. This is well above the 2% target set by the Government and will lower expectations of an interest rate cut over coming months.

Mervyn King, governor of the Bank of England (BoE), may have to write to the Chancellor if inflation tops 3% to explain why inflation has risen to this level and what is being done to combat the rise. This would be the second time that a letter of this sort has been sent in the 10 years since the BoE assumed monetary policy, the first time was in April 2007 when inflation was above 3%.

The announcement of inflation hitting 3% could be an explanation behind the decision by the Monetary Policy Committee (MPC) to hold interest rates at 5% this month. The MPC would have been aware of the CPI before the data was officially released.