However, the latest rise is in line with the MPC's prediction in its statement (external website) on last week's interest rate decision, that:

Inflation is likely to rise further to above 5% in the next month or two, in large part as the full effects of already announced increases in the price of domestic energy are felt.

Looking further ahead, the MPC expects inflation to fall back sharply as 2009 gets underway. This view is shared by our panel of expert economic commentators, who predict (subscription required) that:

...looking out into next year, inflation [on both the CPI and retail prices index (RPI) measures] should collapse, not only because of lower commodity [prices], but also because of policy rate cuts and a slowdown in economic growth.

RPI has also shown a small resurgence, reversing the 0.2 percentage points dip recorded last month to stand at 5% in September 2008. But CPI has nonetheless overtaken RPI.

The gap between pay and RPI inflation has therefore widened once more. The IRS headline pay award is now 1.5 percentage points below RPI, at 3.5%, according to our latest analysis (subscription required), based on pay settlements concluded over the three months to 31 August 2008.

It will be intriguing to see how this picture changes when IRS pay data for the three months to 30 September 2008 are published to XpertHR's pay and benefits homepage (subscription required) next Friday (24 October 2008).

• Does your organisation carry out an annual pay review in October? If so, and if it has now been settled, please get in touch so that we can add your organisation's pay award to the IRS database.