Inflation rises to 3.3%: what does it mean for you?

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The consumer prices index – the official measure of inflation - rose to 3.3% from 3.2% in the month of November, official figures from the Office for National Statistics (ONS) show - well above the Bank of England's 2% target.

This follows a record 1.6% price hike for food and non-alcoholic drinks, with the price of bread, cereals and meat rising 1.9% between October and November. Food prices will rocket thanks to an increase in the price of flour, breakfast cereals and poultry.

Clothing and footwear prices also rose by 2% in the month, with the biggest price hikes coming from men's outerwear clothing. It coincides with the highest cotton prices in 15 years, which will increase the price of clothing.

Filling your car up at the station will also become more expensive. Crude oil prices have risen from $85 to $90 a barrel recently, which has in effect pushed the price of petrol up by 1.8p a litre.

Meanwhile, the retail prices index, which includes mortgage interest payments, is also up to 4.7% in November from 4.5% the month before. 

Paul Hunt, managing director at Phoebus Software says: "With the VAT rise now only a few weeks away, the gains made by consumers through lower mortgage rates are at risk of becoming offset by rising costs.

"The Monetary Policy Committee (MPC) must strike a very careful balance between restricting consumer demand now – risking a sweeping loss of consumer confidence ahead of the public sector cuts – and the possibility that spiralling prices will necessitate a very strong monetary response next year."

He adds: "The current level of inflation means that the MPC's next decisions are critical to the UK's economic future in 2011."

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