2017.10.1723:24:00UTC+00UK Inflation Surges to Highest Level in Over Five Years

Britain's key inflation rate jumped to its highest level since April 2012 in September, bolstered by the rise in transport and food prices.

Official figures showed the Consumer Price Index surged to 3 percent, a level last seen more than five years ago and higher than the 2.9 percent in August. The increase in inflation raises the possibility of a interest rate hike next month.

The numbers are significant because state pension payments from April 2018 will increase in accordance with the CPI reading in the previous month. Under the “triple lock” agreement, the basic state pension increases by a rate equal to the September's CPI rate, earnings growth or 2.5 percent, whichever is higher.

Inflation is now 0.9 percent higher than the rate of wage growth, meaning that Britons are feeling the income squeeze.

The decline in the pound since the Brexit vote last year has been a prime factor behind the surge in the inflation rate, as the cost of important goods has increased. According to ONS, food prices along with a range of transport costs helped to drive up inflation in September, which was partly offset by the clothing prices that increased less strongly compared to the same period last year.