Consumer inflation rose to an unexpected high of 4.7% during August, with experts warning struggling families to expect inflation to rise as high as 5% before we see a drop.
The figure for CPI inflation, which does not factor in mortgage payments, remains well above the government’s target of 2% and has been blamed on surging food and energy prices.
Rises in the price of fuel have also been highlighted as a reason behind the increase although slight drops in the costs of clothing and communications have prevented the rate from rising further.
But hard-pressed Brits are being told to prepare for even more hardship; with the Bank of England governor Mervyn King predicting that the economic situation is going to get worse before it gets better.
In his letter to Chancellor Alastair Darling, King claimed that “the expected peak in inflation later this year is now likely to be significantly higher than anticipated.”
King also suggested that the weak pound is likely to keep the inflation “markedly above the target until well into 2009.”
This could lead to a cut in interest rates as the Bank look to inject life into a stagnant housing market.