Inflation soars to near-decade high
The consumer prices index (CPI) rose from 2 per cent in July, the biggest jump since records began in 1997, according to the Office for National Statistics (ONS).
The last time inflation was higher was in January 2012.
Increased food and petrol prices fueled much of the rise.
Supply chain issues and higher shipping costs saw food prices rise by the largest amount since August 2008, while average petrol prices last month were around 21p more a litre than a year earlier.
However, the ONS said the surge in prices was likely to be “temporary”, attributing much of the rise to prices in restaurants, bars and hotels being lower last year thanks to the Eat Out to Help Out scheme, which offered customers discounted food and drink.
Jonathan Athow, deputy national statistician at the ONS said: “August saw the largest rise in annual inflation month on month since the series was introduced almost a quarter of a century ago.
“However, much of this is likely to be temporary as last year restaurant and café prices fell substantially due to the ‘Eat Out to Help Out’ scheme, while this year prices rose.”
However, the Bank of England predicts prices will rise further before the end of the year.
Kevin Brown, savings specialist at Scottish Friendly, said: “A surprise downward turn in July was short-lived and the Bank of England is now expecting inflation to reach highs of 4 per cent in the last quarter of 2021.
“Many indicators have been showing for a while that inflation is likely to hit 4 per cent, but we believe it could surpass this and reach over 5 per cent in the near future.
“We are starting to see the effect of rising inflation on households already, with supermarket shortages and the lack of lorry drivers hitting the headlines. Without a solution to rising commodity and shipping costs as well as Brexit-related red tape, the lead up to Christmas could prove tough for many families across the UK.”
Laura Suter, head of personal finance at AJ Bell, said: “Savers last month enjoyed a helpful mixture of a small war on rates in the savings market and a dip in inflation. It was a bright spot after a bleak few months for cash savers.
“However, they will be hoping the battle for cash keeps playing out and interest rates keep rising, as the hurdle for your cash to just keep pace with prices has now ratcheted up.”