Inflation rose to 4.7 per cent today as the London Stock Exchange slumped again after a dramatic night of collapsing stock markets around the world in the wake of the most calamitous 48 hours the financial world has endured since the Wall Street Crash.
Soaring energy prices pushed up the Consumer Prices Index, by 0.3 per cent, to its highest level since 1992.
The increase makes longed-for interest rate cuts to ease the burden on homeowners even more unlikely.
Governor of the Bank of England, Mervyn King, will now have to write another letter to the Government explaining why inflation is still more than one per cent above its two per cent target – the second time he has had to do so this year.
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It came as the FTSE-100 plunged 72.7 points to 5131.5 on opening today to reach its lowest position for three years. By 9am, it had fallen 90 points before rising slightly.
It follows a 212.5 point drop yesterday after the demise of two of the world’s biggest banking superpowers, Lehman Brothers and Merrill Lynch.
Lehman, the fourth largest investment bank in the world, filed for bankruptcy while its bigger Wall Street neighbour agreed a cut-price $50bn takeover deal to avoid becoming the next to collapse.