The eye-watering rise is due to skyrocketing energy bills, and it will also be reflected in the every day items we all buy to help us live.
We are not used to such a scenario, at least not since the late 1970s. Inflation has bumped around at three per cent and under for many years. We have enjoyed getting used to shops fighting for our custom by cutting prices.
Now, despite the arrival of more budget ranges in stores, prices are rising fast. Our Feed a Family campaign normally runs at Christmas, but this year we have asked for people to give now, just as we enter the August bank holiday.
Experts forecast that Consumer Price Index (CPI) inflation will reach 18.6 per cent as soon as January. That will represent the highest rate for almost half a century.
Last month, CPI inflation struck a new 40-year-high of 10.1 per cent.
The new projections are ever-more frightening when you bear in mind that the Bank of England has previously projected inflation will peak above 13 per cent in October before declining.
Citi analyst Ben Nabarro has forecast that inflation will jump to 14.8 per cent in October as energy bills spike for UK households.
He says inflation will accelerate because of eye-watering gas and electricity prices, reflected in Friday’s energy cap announcement.
A further increase in energy bills in January will push inflation towards the new peak, he says, with another surge in April.
The new forecasts predict that inflation will stay in double figures for the next 12 months and will finally dip back below the Bank of England target rate of two per cent by April 2024.
Of course the data can be confusing. And the prospects of inflation combined with recession – or stagflation as it is dubbed – are being debated by those who enjoy studying the theory of economics.
The reality is that, even with Government intervention, we are in for a tough time.
One charity says families on low incomes will “fall through the ice” this winter without that extra Government help, as they are set to face an estimated £1,000 shortfall on their energy bills, a charity has warned.
The Child Poverty Action Group (CPAG) based its assumption on costs for those with children rising by an estimated £2,200 on average in 2022-23, while the Government’s cost-of-living support package typically amounts to just £1,200 for qualifying households.
Average energy bills for households without children are expected to be £1,700 higher in 2022-2023 than the year before, CPAG added.
The charity is urging the Government to increase its support offer to ensure families have enough to cover their energy bills and other costs this winter.
CPAG is also calling for an 18 per cent increase in benefits in April to help with the pressure of rising costs. Alison Garnham, CPAG chief executive, said: “With a £1,000 shortfall just for energy bills, many struggling families will fall through the ice this winter unless the Government makes more help available fast. Over the next few months families will need extra support that covers their costs and reflects family size, and social security must rise to match inflation from April.
Four million children are already in poverty with many others now perilously close. Leaving their families to sink cannot be an option.”
Downing Street has insisted there is no need for consumers to panic and “households, businesses and industry can be confident they will get the electricity and gas that they need over the winter”.
A Government spokesman said: “We recognise people are struggling with rising prices, which is why we are protecting millions of the most vulnerable people with at least £1,200 of direct payments, starting with the £326 cost-of-living payment, which has already been issued to more than seven million low income households.
“Through our £37 billion support package, all households will receive £400 energy payments, while vulnerable people in England are also being supported by the Government’s Household Support Fund, which was boosted by £500 million, to help pay for essentials.”
Interest rates increased to 1.75 per cent earlier this month but the economist warned that it could need to rise as high as 7 per cent if “signs of embedded inflation emerge”.