Inflation in August was 4.7%, far above the government’s target of 2%, and is predicted to peak at 5% later this year.
In a letter to the chancellor, the governor of the Bank of England, Mervyn King, said inflation has risen sharply from 2.1% in December to last month's high.
He said monetary policy is partly to blame, but “unanticipated” issues such as increases in the price of energy and food are also to blame.
“These price rises have led to sharp increases in headline inflation rates around the world,” said Mr King.
He also pointed out that sterling has depreciated by 15% since its peak last July – the fall in the value of sterling pushes up import price inflation.
“Inflation is likely to remain markedly above the target until well into 2009,” warned Mr King.
In response to the deepening problem, the chancellor Alastair Darling, said: “Clearly this is a challenging time for the UK economy.”