The annual rate of inflation increased to 3.2 percent in April ? the highest level since December ? as a 17.1 percent jump in health insurance took effect.

The increase in health insurance helped to drive the health and personal care sector of the Consumer Price Index up by 8.8 percent compared to March and by ten percent year over year, according to a Government statement.

"The seasonal rise in health insurance costs factored heavily in the upward swing as insurance premiums rose 17.1 percent on average," the statement said. "This was in response to higher hospital rates. The increase in claims for medical services received abroad also contributed to the overall rise in health care costs."

The rise in health insurance costs could have been even higher. Insurance companies and Government's own actuary recommended a 22 percent increase in health costs this year, but Finance Minister Paula Cox capped the increase at 12 percent.

Government and insurers hope that the Bermuda Health Council will help to slow the rise in costs. Legislation establishing the council was tabled in the House of Assembly last Friday and is likely to be debated next Friday.

Budget-related increases also contributed to the rise in prices. The cost of licensing cars and motorbikes rose by 6.6 percent and 9.7 percent respectively after vehicle licence fees were increased in the Budget, pushing the transport and vehicles sector up by one percent overall.

And the cost of cigarettes rose 3.9 percent after the tax on tobacco was hiked. Overall, the tobacco and liquor sector rose by 1.8 percent as marginal increases in alcohol were also recorded.

Rising oil prices also took their toll. The fuel and power sector rose by 0.5 percent in response to a 3.5 percent increase in the fuel adjustment clause for electricity.

Increases in fuel and power costs are likely to continue, according to industry leaders.

Other sectors were largely static. Food prices remained unchanged overall, while rents increased by 0.2 percent month over month and two percent year over year.

Clothing and footwear were unchanged compared to March as were household goods.

While inflation in Bermuda has remained between three percent and 3.2 percent since December, it remains higher than most of its major trading partners. In April, US inflation was 2.3 percent, Canadian prices rose by 1.6 percent and the UK's inflation rare was 1.2 percent.