The cost of living jumped by the biggest amount on record last month as pandemic chaos caused prices to rise.
According to the Office for National Statistics (ONS), inflation rose from 2 percent in July to 3.2 percent in August – the biggest increase since 1997.
This would raise fears that it could spiral out of control and put pressure on the Bank of England to raise interest rates.
Rising prices: According to the Office for National Statistics, inflation rose from 2 per cent in July to 3.2 per cent in August
The bank slashed rates to a record low of 0.1 per cent last year to stimulate spending, and injected cash into the economy through an £895 billion money-printing programme.
But the ONS urged caution in interpreting the reading, pointing out that it is calculated today compared to prices during an unusual period a year ago.
In August 2020, going out for lunch and dinner was much cheaper due to the Eat Out to Help Out plan, cutting restaurant bills in half.
Sarah Coles, an analyst at Hargreaves Lansdowne, said: ‘It was dealt a significant blow by this plan, which would be out of the figures next month.’
The ONS said prices of food, furniture and household appliances, and entertainment and cultural activities also rose.
Inflation is likely to rise further due to increase in energy price cap and end of VAT cut for hospitality firms.
The bank expects rising inflation to be temporary. Thomas Pugh, the accountant at RSM, said: ‘The way back to the mountain of inflation should be just as fast.’
Due to temporary factors, the bank is not expected to start raising interest rates until next year.
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