Consumers faced a steep rise in the cost of living in February after it emerged a key measure of inflation hit the highest level in 15 years.

The Retail Prices Index (RPI), the broader measure of living costs which includes mortgage payments, rose to 4.6 per cent in February from 4.2 per cent the previous month - its highest level since August 1991 - the Office for National Statistics (ONS) said.

As well as mortgages, the RPI also includes costs such as council tax payments, TV licences and road taxes which are excluded from the Bank of England's official measure of inflation, the Consumer Price Index (CPI).

Unions also use the RPI as a key bargaining tool in wage negotiations leading to fears of inflationary pay demands.

Investec Securities chief economist Philip Shaw said he was "relaxed" about high RPI levels.

He said: "There is always a risk that it would have a higher effect on inflation, but on the evidence so far from recent wage settlements in January, it is not happening yet."

Inflation is also expected to come down this year as consumers benefit from lower gas and electricity prices following the recent price war between energy firms.

The CPI edged up from 2.7 per cent to 2.8 per cent in February following rising costs in air fares caused by the doubling of Air Passenger Duty at the beginning of the month.

The unexpected rise prompted predictions from economists that the bank's Monetary Policy Committee could raise interest rates again as early as next month to prevent the measure rising above three per cent.