INFLATION has soared to 7% according to new data from the Office for National Statistics in another bitter blow to family finances.
The consumer price index (CPI) rose by another 0.8 percentage points in March, up from 6.2% in February.
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Soaring energy bills and and petrol prices were the main drivers behind the rocketing rate, the ONS said.
Fuel prices have soared to record highs recently, mainly down to supply concerns due to the Russia-Ukraine crisis.
While millions of families saw their energy bills double to an average of £1,971 a year from April 1 after the price cap – which limits how much suppliers can charge for your supply – went up.
The eye-watering hike means inflation is now at the highest rate since March 1992, when it stood at 7.1%.
It has increased at a faster rate than economists predicted – experts estimated that it would rise to 6.7%.
Inflation is a measure of how much the prices of goods and services have changed over time.
When it goes up, prices on everyday items and essentials and bills also rise – which means you need to make your money stretch further.
Experts have predicted that inflation will only continue to go up.
The Bank of England has said that inflation could peak at around 8% in April – when families were hit by the staggering hike to energy bills.
KPMG head of consumer markets, retail and leisure Linda Ellett said: “As the cost of living continues to rise, consumers are having to cut back in order to balance their budgets.
“Sales growth on the high street shrunk in March and with increases in energy prices and national insurance this month, more people will be scrutinising their non-essential spend.”
Killik & Co partner Rachel Winter said there is “no relief in sight” for families battling against rising prices.
She added: “Inflation continues its sharp rise as we enter yet another quarter of uncertainty, and the economic outlook remains murky.”
How will it affect household finances?
Inflation has a double-whammy effect on households.
Firstly, you’ll notice the cost of everyday essentials going up.
That means at the supermarket your weekly shop will be higher, and your bills at home will rocket too.
The average increase in prices is usually based on how much things cost today compared to a year ago.
So if the rate of inflation were to be 2%, it means something that cost £1 a year ago will cost £1.02 today – it might not sound a lot but it soon adds up when everything goes up.
Further hurting households is the fact that wages have failed to keep up with inflation, so Brits have less in their pockets to fork out on all the rocketing costs.
If your salary hasn’t kept up with the soaring rates, then you could find it harder to afford the cost of getting by.
That’s because a higher rate of inflation means your money doesn’t go as far and you have to spend more as a result.
The second effect of inflation is that is eats away at the value of your savings.
If inflation is higher than the interest you’re earning on your savings, you are effectively losing money every year.
How to protect your finances
Household budgets will feel the squeeze as inflation soars, but there are a number of ways to buffer the blow.
While food prices are on the rise, you’ll want to try and cut the cost of your grocery shop.
Try hunting for yellow sticker food – this is produce that is nearing its sell by date that shops reduce to try and shift before the end of the day.
You could save up to 75% on these items.
While switching to a cheaper supermarket and signing up to various loyalty schemes, where you can get vouchers for money off your groceries, is also worth doing.
See if you can get extra help for soaring energy bills.
Some suppliers have hardship funds you can apply to – for example, British Gas and Octopus have both set up funds to help customers who are struggling with their bills.
You could try and reduce how much energy you are using too – for example, you can reduce your bills with a simple trick such as putting foil behind your radiator.
You might be entitled to benefits to help you get by – use an online benefits calculator to make sure you’re not missing out on any extra cash.
More to follow…
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