The rise is higher than expected, having been 3.8 per cent in June.
Rising food and petrol prices have been bolstering inflation in the past few months. The Retail Prices Index also rose from 4.6 per cent to 5 per cent.
Liberal Democrat shadow chancellor Vince Cable says that Britain is facing stagflation, with the news highlighting the Government and Bank of England’s dilemma.
He says: “Since inflation is now more than twice the target level, the Bank of England has no alternative but to maintain monetary discipline.
“There must be no attempt to undermine the independence of the Bank of England, even if its decisions prove to be unpopular in the short term.
“It’s very clear that we’re in for a dose of stagflation, with the economy slowing abruptly and inflation too high and increasing.”