Consumer Price Index (CPI) inflation hit 4.5 per cent over the last 12 months, well on its way to breaking the five per cent level. The Bank of England expects it to peak at above five per cent by the end of this year.
Clothing and footwear prices rose by the most over the past month, at 3.7 per cent.
Over the last 12 months alcohol and tobacco led the increase, rising by 9.8 per cent, closely followed by a 7.4 per cent rise in transport costs.
The only full sector to experience a twelve-month decline in prices was recreation and culture, with a fall of 0.8 per cent in the last 12 months.
Analysts do not expect the figures to change the Bank of England’s attitude towards loose monetary policy.
“Since monetary policy decisions take about one year to fully affect output in the real economy, the Bank is right to stress the longer-term prospects for the economy,” said Teodor Todorov from the Centre for Economics and Business Research. “The Bank expects temporary factors to vanish and downward pressures on prices to begin to bring down the headline rate towards the two per cent target.”
That is little comfort to groups like savers and pensioners on fixed incomes, however, with interest groups putting pressure on the Bank of England to combat inflation more rapidly. Saga measures the cost of living for over 50s, estimating that CPI for 50 to 64 year-olds hit 4.7 per cent last month.
Using the Retail Price Index (RPI) measure, Saga claims the general population felt a rise in living costs of 13.9 per cent over the last four years, rising to 17.7 per cent for 50 to 64 year-olds and 19 per cent for over 65s.
The group wants higher ISA limits to protect older people’s savings.