Strong sales of household goods and a penchant for home shopping helped retail sales rebound in August, suggesting last month's interest rate rise did not deter shoppers.

The Office for National Statistics said sales rose 0.3 percent in August, putting them up 4.3 percent on the year. It also significantly revised up July's reading which was initially reported as a fall.

The pound rose and interest rate futures fell as the figures reinforced expectations UK interest rates will rise again before the end of the year.

Markets are currently pencilling in a rise to 5.0 percent in November as the Bank of England acts to curb inflationary pressures.

Indeed, retailers seemed to feel less need to cut prices to attract shoppers in August, with average prices just 0.1 percent lower than a year ago, the smallest level of discounting since January 2002.

With consumer activity robust and inflation measures continuing to increase, a November rate hike is looking increasingly likely, said James Knightley, economist at ING.

Sales growth was driven by household goods and non store retailing, such as mail order and internet shopping, which saw its biggest monthly gain in nearly four years.

This chimes with results from clothing retailer Next this week which showed a surge in its catalogue and internet business.

However, the ONS figures showed sales of food fell sharply in August more than reversing July's gain.