Pressure on the Bank of England to raise interest rates intensified today as inflation increased to its highest level in more than two years in January.

The Consumer Prices Index rose to four per cent last month, the Office for National Statistics said, as the increase in VAT from 17.5 per cent to 20 per cent and the soaring cost of crude oil pushed up the cost of living.

Today's CPI figure, the highest since November 2008, is double the Government's target and could mean a hike in interest rates from their current historic low of 0.5 per cent.

As inflation has been more than 1 per cent above target for three months, Bank of England Governor Mervyn King is required to write to Chancellor George Osborne to explain.