More pressure on household finances as inflation hits 30-year high and soars to 5.4%
INFLATION has soared to 5.4% - up from 5.1% in December, according to new data from the Office for National Statistics.
The cost of living is rising at its fastest rate in 30 years, the ONS said.
It comes as wages have been seen to take a tumble with average pay growth recorded at just 4.2% - far lower than the increasing inflation figures.
The double whammy of high inflation and lower wages only piles on more pressure on already struggling household finances.
Rising prices have already pushed up bills and created a cost of living crisis for millions of Brits.
Food, furniture and clothing prices all surged, according to the latest data.
Prices are rising at a faster rate since the coronavirus pandemic.
The 5.4% peak is the highest 12-month inflation rate in the National Statistic data series, according to the analysts.
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The last time it was any higher historically was in March 1992, when it stood at 7.1%.
The latest figure of 5.4% is up from 5.1% in November, 4.2% in October, 3.1% in September and 3.2% in August.
It is also widely expected to keep rising, with experts expecting inflation to hit 6% by the spring.
Meanwhile, data released yesterday shows the number of people in work has risen, and wage growth is slowing.
Lauren Thomas, Economist at said: "Inflation is eating away at wages at a brutal pace we haven't seen for many years.
"Lower income workers are being hit particularly hard, especially as the cost of fuel and electricity rises.";
Further pressure is coming too, as in April a new energy price cap will come into effect, forcing up bills for millions of households by as much as 50%.
Many families are already having to make the stark decision between heating and eating as they struggle with the costs.
Last month the Bank of England raised interest rates from 0.1% to 0.25%, so the new data may put pressure on yet another adjustment.
It could hike them again at its next meeting in February.
What does inflation mean for your finances?
The rate of inflation is published each month by the , and this measures how much prices have changed on average over the past year.
The average increase in prices is usually based on how much things cost today compared to a year ago.
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So as the percentage goes up month on month, it means prices are rising.
It means the money you have right now doesn't go as far as it did, and you have to spend more, usually to get the same stuff.
Especially since it was revealed wages aren't rising in the same way, you could be out of pocket paying higher prices for goods while not earning as much to cover it.
It also means that if inflation is higher than the interest you're earning on your savings, you are effectively losing money.
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A saver with £1,000 stashed away in an easy-access cash account that pays an interest rate of 0.6% for instance, would make just £6.
But inflation means that £1,000 today would be worth 3% less in a year's time - effectively meaning you lose £30 of spending power.