Blue chip shares struggled for direction as inflation lifted to its highest rate in two-and-a-half years, though it still came in below expectations.

Consumer Prices Index (CPI) inflation hit 1.8% last month, the Office for National Statistics (ONS) said, up from a rate of 1.6% in December. The measure was primarily pushed up by petrol price rises.

It is the fourth consecutive month that the rate has risen and takes inflation to its highest since June 2014, but is still below the 1.9% expected by the City.

The FTSE 100 Index edged up 2.3 points to 7281.3 in afternoon trading, as inflation inched closer to the Bank of England's 2% inflation target. The FTSE 250 Index rose 21.4 points to 18780.2.

IG chief market analyst Chris Beauchamp said: "Evidently markets were hoping for a stronger reading."

Engine-maker Rolls-Royce was the biggest faller in the top flight after it reported a record £4.6bn ($5.7bn) annual loss, weighed down by the pound's fall and its recent bribery settlement.

The FTSE 100 engineer said one-off factors, such as £4.4bn of paper losses from currency hedging contracts following a 16% fall in the value of sterling since June's Brexit vote, accounted for the loss.

It also revealed last month that it agreed to pay £671m to settle corruption cases with UK, US and Brazilian authorities. Shares fell almost 4%, or 28p to 712p.

The biggest afternoon risers in the FTSE 100 Index were TUI (+65p to 1222p), Pearson (+17.5p to 668.5p), Capita (+12p to 525.5p), Fresnillo (+31p to 1555p) and Randgold Resources (+120p to 7530p).

The biggest afternoon fallers in the FTSE 100 Index were Rolls-Royce (+28p to 712p), BAE Systems (-10p to 606p), Anglo American (-22.5p to 1387p), Micro Focus (-25p to 2229p) and Reckitt Benckiser (-77p to 6998p).

The biggest afternoon risers in the FTSE 250 Index were Acacia Mining (+32.4p to 497.1p), Virgin Money (+13p to 342p), RPC (+32p to 945p), Spectris (+75p to 2499p) and Entertainment One (+7.1p to 244.4p).

The biggest afternoon fallers in the FTSE 250 Index were Evraz (-9.2p to 244.7p), Mitchells & Butlers (-7.2p to 249.1p), Vectura Group (-3.7p to 142.1p), Greggs (-22p to 1011p) and Euromoney (-21p to 1098p).