Headline annual inflation in May was 4.2%, up 0.2% from April, it was announced today.

The figure is the highest since May 1992, when it stood at 4.3%.

The underlying rate of inflation, which excludes mortgage interest payments, was 3.2% in May, up from 3.0% in April.

This is the highest since November, 1996, when it was 3.3%, and puts it yet further above the Government's 2.5% target.

However, the Treasury is likely to be relaxed about the rise because it was expected following tax increases in the March Budget.

The impact on inflation of these changes is expected to be ironed out by July.

The Office for National Statistics said the main reason for the inflation rise was sharp price increases for seasonal food, and fresh vegetables in particular.

The monthly rise for these two items was the largest for any May since 1966, and followed record-breaking wet weather in April.

Figures were also released today for the Public Sector Net Cash Requirement, formerly known as the Public Sector Borrowing Requirement (PSBR).

The figure was £2.5 billion in May, representing a net repayment of £0.8 billion for the first two months of the 1998-99 financial year, compared with borrowing of £3.5 billion in 1997-98.

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