INFLATION has not yet peaked, Mark Carney, the Governor of the Bank of England, has warned, as the surge in prices last month, blamed on Brexit, hit a five-year high of three per cent.

While the hike in inflation is bad news for consumers and businesses, it will mean pensioners will see their state pensions rise by at least three per cent from April 2018 as the rate is set in line with September's inflation number. The triple lock means pensions rise either by the rate of inflation, earnings growth or 2.5 per cent, whichever is the highest.

Mr Carney, having previously pointed to a rate rise in November, appeared to row back slightly when he told the Commons Treasury Committee that most members of the Bank’s Monetary Policy Committee believed that a rate rise in the “coming months” might be appropriate.

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The two newest members of the MPC, Sir Dave Ramsden, the new Deputy Governor, and Silvana Tenreyro, have both suggested they have not been persuaded yet to vote for higher interest rates.

Sir Dave noted that in September he "wasn't in the majority" among MPC members, who saw the case for potentially removing some monetary stimulus in the "coming months".

But Ms Tenreyro told MPs she would be "minded to" vote for a rate hike in the coming months if data were consistent with expectations.

The Bank Governor told MPs that inflation was expected to peak above three per cent in October or November, meaning it was "more likely than not" that he would have to write a letter to Philip Hammond, the Chancellor, explaining why inflation was more than one per cent above target.

But he said the rise in inflation was "anticipated" given the tumble in the value of the pound since the Brexit vote, which has been pushing up the cost of goods and services in the UK.

Inflation is expected to ease back after the autumn peak but Mr Carney warned that the MPC expected the effect of the Brexit-hit pound to keep inflation above the two per cent target for the next three years.

Treasury committee member Alister Jack asked whether or not it would have been better for the Bank to have raised interest rates in order to support the pound rather than to have cut them to a record low of 0.25 per cent in the wake of the Brexit vote.

The Conservative MP for Dumfries and Galloway asked whether the interest rate cut was "unnecessary".

But Mr Carney defended the Bank's decision, saying: “No, I wouldn't agree at all. The movement in the pound...has largely been determined by the prospects for that trade and investment deal with the European Union and has fluctuated largely around both the expectations of the scale of the deal, and the timing of that deal."

Earlier in the day, official figures showed inflation surged to a five-year high of three per cent in September as rising food and transport costs upped the financial pressure on households.

Consumers have been feeling the pinch as the Brexit-hit pound bumps up everyday prices and wage growth tracks behind inflation.

Peter Dowd for Labour said: “Inflation has reached its highest level in five years, while real earnings are still lower than in 2010, following seven years of Tory economic failure.

“Only Labour will deliver a £10 per hour Real Living Wage, investment in infrastructure, and an effective industrial strategy to raise living standards and build an economy for the many, not the few.”

Kirsty Blackman for the SNP said the Tories’ “extreme” Brexit squeeze was hitting families and businesses across the country and rising inflation would put even more pressure on household budgets.

“The Chancellor must use the November Budget to deliver real help for hard-pressed families by scrapping the cap on public sector pay, tackling the wages crisis, and supporting those on benefits, to prevent even more low income families being driven into poverty, debt and destitution.

“As Brexit continues to drive up the cost of living and impact across the economy, the UK Government must commit to protecting our vital membership of the single market and customs union to avoid further devastation to jobs, incomes, and businesses,” added the party’s economy spokeswoman.

Paul Hollingsworth, an analyst at Capital Economics, predicted a further increase in inflation to 3.2 per cent in October.

But he added: “We think inflation will be back below three per cent by the end of this year and while it looks set to remain above the MPC target throughout next year, we think it will end 2018 at around 2.25 per cent.”