Soaring cost of food and fuel sends inflation to 3% , the biggest jump in six years

13 April 2012

Inflation is rising at its fastest monthly rate in nearly six years, official figures showed yesterday.

The Consumer Prices Index - the Government's preferred measure - was 0.5 per cent higher last month than in March.

The annual rate stands at 3 per cent, fully 1 per cent above the Government's target.

The 0.5 per cent leap, which will dismay households struggling to make ends meet, was far higher than economists had expected.

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Analysts warned that the cost of living is likely to rise further over the summer.

The Retail Prices Index, an alternative measure of inflation which includes housing costs, rose to 4.2 per cent in April - 0.4 per cent up on March.

Howard Archer, chief UK economist at Global Insight, a financial analysis firm, called the figures "another horrible surprise on the

inflation front".

The Daily Mail's Cost of Living Index shows the price of a basket of essentials is 19.1 per cent higher in May than it was a year ago.

According to the Office for National Statistics, which released the inflation figures yesterday, prices for bread, biscuits and cereals have shot up 8.5 per cent in a year, a record rise.

Bank of England Governor Mervyn King has to write to the Chancellor if inflation reaches just 0.1 per cent higher

Increases in the costs of housing, water, electricity and petrol are also seen as behind the surge in inflation.

Further hikes in energy bills are expected and it is feared these could push inflation as high as 4 per cent.

James Knightley, an economist at ING Bank, said: "With utility providers warning of further nearterm price hikes, it looks increasingly as though inflation will stay above 3 per cent for the rest of this year."

Rising prices are especially bad news for mortgageholders because they make the Bank of England less likely to cut interest rates next month.

Its monetary policy committee, which is charged with controlling inflation, has also warned that the cost of living is likely to exceed 3 per cent later this year.

If so, Mervyn King, the Bank's governor, will have to write to the Chancellor outlining how he intends to tackle the problem.

He was forced to issue just such a letter last April when inflation surged beyond the Government's target.

Vince Cable, LibDem Treasury spokesman, said: "The Bank of England finds itself trapped in the worst possible position, with a rapidly slowing economy alongside soaring inflation.

"This rapid jump in inflation puts even more pressure on already over-stretched family budgets.

"The wheels are starting to come off the British economy yet the Prime Minister is still doing nothing."

Philip Hammond, a Tory Treasury spokesman, said: "With inflation rising dramatically and official figures beginning to reflect what hard-pressed families have been experiencing for months, perhaps Gordon Brown will now have the decency to stop claiming he has got inflation down."

Pensioners and others on fixed incomes are those most likely to lose out as living costs rise.

Age Concern called yesterday for the basic state pension to rise to £124 a week from the current £90.70 level for a single person.

The "real" rate of inflation for the over-75s is 4.1 per cent, according to a study published yesterday by Alliance Trust, an investment company.

Its research reflects a widespread concern that inflation is actually much higher than the ONS figures suggest.

Mysupermarket.co.uk, a price comparison service, said the average price of a thick- sliced white loaf has jumped 20 per cent over the past year to 65p.

A 24-pack of Weetabix is up 21 per cent to £1.78.

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