Earlier on Tuesday, the country's Office for National Statistics (ONS) said annual inflation during April rose to a rate of 3.0%, up sharply from March's 2.5% and well above market expectations for a 2.6% rise.

April's appreciation in the year-over-year rate between months was the fastest since July 2002. If the rate were to rise above 3.0%, then BOE Governor Mervyn King will be forced to write a letter of explanation to Chancellor of the Exchequer Alistair Darling, according to UK norms.

The ONS said rising costs of energy made the biggest contribution to the rise in CPI as households were hit by rising gas and electricity bills. Housing, water, electricity, gas and other fuels rose by 5.4% on an annual basis during April.

There were also large upward contributions from food and soft drinks, which were up 6.6% in year-over-year terms. The March 12 budget also contributed to the rise, adding around 0.12% to the annual rate, largely reflecting an increase in excise duty on alcohol. Concurrently, downward effects came from clothing and footwear.

On a month-over-month basis, April CPI inflation rose by 0.8% from 0.4% in March, the biggest rise since May 2001. The core CPI measure, which excludes energy, food, alcoholic beverages and tobacco, rose at a rate of 1.4% in year-over-year terms, up from March's 1.3%. On a month-over-month basis, core CPI was up 0.5% after rising 0.4% in March.

The annualized Retail Price Index rose 4.0%, up from 3.8% in March; the highest rise since October 2007. In month-over-month terms, RPI inflation rose 0.9% after rising 0.6% in March. Meanwhile, the annual RPIX measure, which excludes mortgage payments installments, came in at 4.0%, above the 3.5% rate seen in March. ONS also announced that the MPC had access to Tuesday's data ahead of its decision in May to hold UK interest rates at 5.00%

Howard Archer, chief UK economist at Global Insight, feels the inflation data, akin to producer prices published on Monday, was in the same "horrible" genre.

"Given that the MPC had CPI data access last week, it is no wonder that they kept interest rates on hold. Indeed, the chances of a June interest rate cut were rapidly diminishing," Archer said.

"Core inflation, which climbed from 1.2% to 1.4%, is still pretty muted, but April's rise will nevertheless raise concerns that higher energy and food prices are filtering through to have increased second round effects," he added.

Archer believes there was more than enough proof in the figures to indicate that inflationary pressures are currently elevated throughout the supply chain. "Latest data, like much else before it, highlights the extremely difficult position that the MPC is in," he concluded.

David Kern, economic adviser to the British Chambers of Commerce (BCC) shares Archer's concerns and feels the figures will inevitably increase reluctance of some MPC members to consider early interest rate cuts.

"However, there is also growing evidence the slowdown in UK economic activity is worsening. The pace at which house prices are falling appears to have accelerated. Inflation figures, which are mostly due to higher prices for gas, electricity and heating oil, will further intensify the squeeze on personal disposable incomes but the recent figures also point to worsening pressures on business margins," he said.

Matthew Sharratt of Bank of America thinks a dramatic deterioration in inflation prospects may corner the BOE. "However, we still believe that, in time, the MPC will have to lower rates modestly further to support a rapidly moderating economy," he added.

A further rate cut by MPC may now be delayed until August, Sharratt added.

Looking ahead, Paul Dales, economist at Capital Economics, feels April CPI data could be the first sign that retailers are starting to pass on the rise in costs seen towards the start of the inflation pipeline over the last year. He thinks it is likely that CPI inflation will rise to 3.1% in May and beyond, triggering a letter from BOE Governor King to the Chancellor.

However, forex traders are expecting a bounce in the pound sterling crosses.

Sam Stanley, dealing director at Halo Financial, expects the pound to bounce following CPI data on the expectation that June's forecast of a 25 basis points rate cut would be postponed.

"It looks like the reality of the situation has caused traders to think twice about buying the pound, following dreadful inflation figures. Inflation at 3% is the absolute last thing the BOE and the UK economy needs right now. The BOE would have loved a benign figure which allowed them to ease next month to stimulate an economy which is faltering," he said.

Stanley believes "stagflation" is around the corner and Wednesday's BOE inflation report, due for publication at 5:30 a.m. EDT, should show a sharp slowdown in UK growth forecasts.

Gavin Foster, director of Capital Forex, feels the markets' past reliance on core CPI data is fast losing credibility with the investing community as they are susceptible to revisions.

"There is no doubt in our minds that the pound remains a very vulnerable currency which is clearly demonstrated when the carry trade starts to unwind. Technical analysts suggesting a move to the 1.89 level and this could happen in the short to medium term. The Euro has recovered its poise against most pairings, but especially the Pound," he concluded.

By Gaurav Sharma, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Cristina Markham, This email address is being protected from spam bots, you need Javascript enabled to view it