Inflation on the up again

The rate of inflation in June rose to 4.6% and is likely to rise again when domestic energy suppliers impose their next set of price increases in the autumn.

The government’s preferred measure of inflation, the Consumer Price Index (CPI) was up 3.8% in June (May’s year-on-year rise was 3.3%). But the CPI excludes housing costs, so it’s an unrealistic measure of real-world inflation. The more representative Retail Prices Index (RPI) was up 4.3% in May and 4.6% in June and it looks as if the annual rate of increase could top 5% in the autumn unless food or energy prices drop sharply before then.

While higher fuel costs are one big factor, rising food prices continue to push up the rate of inflation, and the bad news is that gas and electricity prices are slated to rise by as much as 40% in the autumn.

So the pressure on household budgets is likely to continue well into 2009.

Most of us will need to take action on several fronts to avoid going into the red each month. So we’re running a continuing series of features, advice and tips on how to beat the crunch.

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