HIGHER air fares and soaring household energy bills sent inflation back up to the Bank of England's target rate of two per cent last month, official figures showed yesterday.

The Consumer Prices Index rate of inflation rose from 1.8 per cent in March to two per cent in April, the Office for National Statistics (ONS) said.

Fears over the impact of higher inflation have contributed to falling stock markets around the world in recent days, with the FTSE 100 index in London particularly badly hit.

The Bank of England suggested last week that it may have to raise interest rates to stop inflation rising above target over a two-year period.

Bank governor Mervyn King said the Monetary Policy Committee (MPC) would be keeping a close eye on inflation expectations as they continued to pick up.

The MPC has kept the cost of borrowing pegged at 4.5 per cent since August last year but many economists now expect the next move to be a rise rather than a fall.

The ONS said higher domestic and international air fares had the biggest impact on inflation last month because of price increases over Easter, which came in April. Soaring gas and electricity bills also had an impact, reflecting rises imposed by suppliers earlier in the year.

The headline RPI rate - which includes mortgage interest payments - increased to 2.6 per cent from 2.4 per cent a month earlier.