The inflation rate rose for the first time in five months in February to stand at the Bank of England's target, official data showed yesterday.

The Office for National Statistics said consumer prices rose 0.3 per cent last month, raising the annual rate a tenth of a point to two per cent, hitting the Bank of England's target level for the first time since June 2005.

Inflation had appeared to be on a downward trend after peaking at 2.5 per cent in September but the latest rise could mark the return of upward price pressures, particularly if recent hikes in utility bills start feeding into the March data.

"The coming three months of data will be dominated by energy prices given utility bill hikes in excess of 20 per cent," said Alan Clarke, economist at BNP Paribas.

Still, financial markets paid little attention to the data as they did nothing to settle the debate about whether the next move in interest rates, pegged at 4.5 per cent since August, will be up or down.

Many analysts still expect slow growth will force the Central Bank to cut interest rates again but others argue that rising price pressures and a recovering economy means that the next move in borrowing costs will be a hike.

Petrol prices actually had a small downward impact on February's inflation rate as they did not rise by as much as they did a year earlier.

The ONS said the biggest downward impact came from the recreation and culture category as the price of computer games rose compared with discounting a year earlier. There was also an upward impact from book prices.