The chances of further monetary tightening were also boosted by a survey from the Confederation of British Industry showing that UK manufacturers' hopes of raising prices and their total order books were both at their strongest since 1995.

National Statistics said yesterday that retail sales volumes had jumped by a seasonallyadjusted 1.4per cent between January and February - the biggest month-on-month rise since January 2005 and double the increase forecast by the City.

Textile, clothing and footwear sales leapt 4.7per cent during February - the biggest monthly jump since December 2002. Colder weather may have fuelled demand for winter ranges, which had appeared muted during a milder January.

Sales volumes were 4.9per cent higher in February than in the same month of last year - the greatest annual increase since November 2004.

Taking the latest three months together to smooth out volatility, volumes were up a solid 1.1per cent on the Septemberto-November period and were 4.1per cent higher than in the equivalent year-earlier period.

Sales in the non-store retail and repair category, which includes internet shopping, were up an annual 15.1per cent in the December to February period. This was the strongest such growth since comparable records began back in 1986. Sterling surged through the dollars-1.97 mark to a six-week high against the US currency in the wake of the retail sales numbers, as financial markets reassessed the UK interest-rate picture yet again. The pound was last night trading around dollars-1.9650 - up more than halfa-cent on the day.

The interest rate outlook was thrown into confusion on Wednesday when minutes of the Monetary Policy Committee's March 7 and 8 meeting, at which base rates were held at 5.25per cent for a second straight month, revealed the minority vote was no longer for another increase but for an immediate cut. However, the minutes also stated that most MPC members "remained concerned that the risks to inf lation over the medium term remained on the upside".

Base rates have been raised by a quarter-point three times this cycle, last August and November and this January.

Economists noted yesterday that MPC members had two weeks ago homed in on the unexpected sharp fall in retail sales in January - a decline revised yesterday by National Statistics from 1.8per cent to a lesser 1.5per cent. Economists saw the bounce in February as a factor likely to help persuade a majority to raise rates one more time.

Lucy O'Carroll, director of research at banking group HBOS's treasury services division, said: "This has felt like a rather rollercoaster week for interest-rate watching, with strong inflation numbers on Tuesday, followed by surprisingly 'dovish' MPC minutes on Wednesday, and then these exceptionally robust retail sales figures.

"Rollercoaster rides are not always comfortable ones, but overall (the) strong (retail) activity figures add to the probability of one more rate rise to 5.5per cent, most likely in May."

However, there were mixed signals in the retail sales numbers. The deflatorwas negative for the second month running - implying prices were lower than a year earlier. It indicated prices last month were 0.3per cent lower than in February 2006, only a marginal easing from the 0.4per cent annual rate of decline indicated in January.

These indicated price falls are in contrast to annual rises signalled at the end of last year - which had suggested retailers might finally be regaining some pricing power. Yesterday's numbers indicated retailers might be struggling again on the pricing front.

In stark contrast, the manufacturers surveyed by the CBI were bullish on pushing through price rises.

Thirty-two per cent predict a rise in domestic prices in the next three months, and only 11per cent anticipate a fall.

The net 21per cent expecting a rise is the highest such balance since March 1995. Manufacturers' order books were, according to the CBI, the strongest since May 1995.