Inflation hits 6.2% as energy, fuel and food price rises squeeze family budgets

INFLATION has soared to 6.2% according to new data from the Office for National Statistics, squeezing household budgets.

The consumer price index (CPI) rose by another 7 percentage points in February, up from 5.5% in January - an eye-watering high not seen in decades.

That's higher than what economists thought it would be - experts predicted it would hit 5.9%.

It means inflation is now at its highest level since March 1992, when it soared to 7.1%.

Inflation is a measure of how much the prices of goods and services have changed over time.

When it goes up, prices on everyday items and essentials from groceries to fuel to transport costs also rise too - which means you'll be paying more just to get by.

The ONS said energy, fuel and food price rises were the biggest contributor to the latest inflation rate increase.

Families have been clobbered with soaring energy bills, and millions will have to fork out £693 a year more from April when the price cap hikes.

This has put ";strong upward pressure" on inflation rates, the ONS said.

While soaring fuel prices and the cost of used cars has also helped to nudge inflation up too.

Fuel prices reached a record high of 147.6 pence per litre in February, which was a record at that time.

That's because the wholesale price of oil is rocketing, mainly due to concerns that the Russia-Ukraine crisis could affect supply.

While the price of used cars is having a knock-on effect on inflation too.

More people are travelling to work now that the economy has reopened for business following the Covid pandemic.

But with a new car supply crisis, many consumers have turned to used ones, which has driven prices up.

Between April 2021 and January 2022, prices for used cars increased by around 32%, the ONS said.

Food price hikes have also helped to drive inflation up.

The cost of fridge staples like bread and cereals, meat, milk, cheese and eggs have all gone up due to supply chain issues and labour shortages, the ONS said.

The energy crisis has also meant companies are paying more to make our grub - but have passed down the cost of rising bills onto consumers.

Rising prices of a big range of other goods from clothing to footwear to furniture has also caused inflation to rise.

ONS chief economist Grant Fitzner said: "Inflation rose steeply in February as prices increased for a wide range of goods and services, for products as diverse as food to toys and games.

"The price of goods leaving UK factories has also been rising substantially and is now at its highest rate for 14 years."

Its not the last of inflation rate hikes Brits should expect to see - experts predict inflation is set to soar to 7% by April.

Experts said Chancellor Rishi Sunak will now be under pressure to tackle the cost of living crisis.

Interactive Investor head of pensions and savings Becky O'Connor said: "The spike in rises is sharp and steep – it’s almost vertical. A generation has grown up having never experienced price rises like this and the pain is far from over.

"Anyone on low, fixed incomes, such as pensioners, will be flung into poverty and debt struggles without further immediate help from the Government. They can expect some help – whether it is enough remains to be seen."

Abrdn client director Colin Dyer said: "Unless the Chancellor has a silver bullet in the works, many will need to cut back on spending to get by, particularly those relying on their savings like retirees."

How will it affect household finances?

Inflation has a double-whammy effect on households.

Firstly, you'll notice the cost of everyday essentials going up.

That means at the supermarket your weekly shop will be higher, and your bills at home will rocket too.

The average increase in prices is usually based on how much things cost today compared to a year ago.

So if the rate of inflation were to be 2%, it means something that cost £1 a year ago will cost £1.02 today - it might not sound a lot but it soon adds up when everything goes up.

Further hurting households is the fact that wages failed to keep up with inflation last year, so Brits have less in their pockets to fork out on all the rocketing costs.

If your salary hasn't kept up with the soaring rates, then you could find it harder to afford the cost of getting by.

That's because a higher rate of inflation means your money doesn't go as far and you have to spend more as a result.

The second effect of inflation is that is eats away at the value of your savings.

If inflation is higher than the interest you're earning on your savings, you are effectively losing money every year.

How to protect your finances

Household budgets will feel the squeeze as inflation soars, but there are a number of ways to buffer the blow.

While food prices are on the rise, you'll want to try and cut the cost of your grocery shop.

Try hunting for yellow sticker food - this is produce that is nearing its sell by date that shops reduce to try and shift before the end of the day.

You could save up to 75% on these items.

While switching to a cheaper supermarket and signing up to various loyalty schemes, where you can get vouchers for money off your groceries, is also worth doing.

See if you can get extra help for soaring energy bills.

Some suppliers have hardship funds you can apply to - for example, British Gas and Octopus have both set up funds to help customers who are struggling with their bills.

You could try and reduce how much energy you are using too - for example, you can reduce your bills with a simple trick such as putting foil behind your radiator.

You might be entitled to benefits to help you get by - use an online benefits calculator to make sure you're not missing out on any extra cash.