THE key underlying rate of inflation unexpectedly rose last month to its highest level since December as food and gas prices soared, official figures have revealed.

The Office for National Statistics said the underlying rate, which excludes mortgage rate repayments, increased by 0.1 per cent last month to two per cent.

Overall, food prices surged by 3.7 per cent, the highest increase since July, 1996, as the cost of bacon and pork shot up by 17 per cent and 12 per cent respectively in comparison to a year ago. The cost of seasonal food was also hit by flooding earlier this year, with potato prices rising 17 per cent.

Gas prices rose by four per cent, with most suppliers raising their rates in April.

The increase in the underlying inflation figure will surprise the City, which was forecasting a slight fall, and could reduce the Bank of England's ability to cut UK interest rates in the coming months.

The Bank's monetary policy committee uses the underlying figure to set the cost of borrowing, and another cut in interest rates either next month or in July could push inflation closer to the targeted 2.5 per cent.

Prices for household goods, seasonal food and clothing all tend to rise in May, a further factor the Bank will have to consider.