Inflation has jumped to a new record high as the consumer price index (CPI) rose to 4.4 per cent in July, according to the latest figures published by the Office of National Statistics (ONS).
This means inflation is now more than double the Bank of England's target rate of two per cent and is at its highest for 16 years.
The rise has mainly been caused by the soaring prices of the products on supermarket shelves, with food inflation currently running at 12.3 per cent, and the cost of filling a tank on the garage forecourts.
More alarmingly, the retail price index (RTI) rate – the most comprehensive measure of livings costs – was slightly over five per cent, which means that inflation has risen above the official bank rate.
Economists were shocked by these latest figures, and predict inflation to climb even more and hit the five per cent mark within the next couple of months. The data does not yet include the rise in gas and electricity
prices announced by energy companies last month.
Those who were hoping that the Bank of England would drop interest rates later this year to stop the country from skidding further into a recession will be sorely disappointed, as the Bank might instead be forced to raise them if inflation is threatening to get out of control
"This is a really disturbing set of data that will not go down at all well at the Bank of England
," Howard Archer, chief economist at Global Insight, commented.
"The sharp spike in inflation in July increases the risk that the bank will raise interest rates despite the fact that the economy seems more likely than not to contract over the second half of the year."
The inflation rate has also now surpassed wage growth which is currently at 3.8 per cent. Accordingly, despite the Chancellor's pleas for wage restraint last month, union leaders have already called for inflation-busting pay rises in order to help struggling families cope with the increased cost of living.
Brendan Barber, the general secretary of the Trades Union Congress, said: "These figures show that things are only getting tighter for families across the UK. It is vital that pay rises keep pace with inflation to ensure that our standard of living is not slashed over coming months. Better pay would also improve consumer confidence."
Age-related research from the Alliance Trust shows that the inflation rate for most people is well above the official rate of 4.4 per cent, and that the elderly in particular suffer from the surge in inflation due to the rise in energy prices which is typically a major part of their spending.
The under 30s are the only age group with an inflation rate less than five per cent, and the rate increases progress with age, with the rate for the 75-year-olds and over hitting 6.3 per cent this month.
Shona Dobbie, head of the Alliance Trust Research Centre said: "This current battle with inflation is particularly worrying for consumers as it is being driven by higher prices for essential things.
"Although the oil price has been falling back over the last few weeks, and we could see petrol price inflation begin to ease, over the next couple of months we expect little respite from high food and utility prices," she added.
"This means that headline inflation is likely to remain at elevated levels and, even when inflationary forces begin to ease, we expect actual price levels for basic goods and services to remain high."
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