UK inflation jumps to 4.5%

17 May 2011

The official measure of inflation rose to 4.5% in August - up from 4.4% in July.

Meanwhile, the retail prices index (RPI), which includes council tax and mortgage payments, has gone up from 5% to 5.2%.

The rate is over double the Bank of England's target of 2%.

The Office for National Statistics (ONS) says a 3.7% increase in clothing and footwear costs between July and August is one of the main contributors towards higher inflation levels.

Housing and household costs have also gone up by 2%, thanks to soaring electricity and gas bills, rent increases and the cost of maintenance. 

Problems for UK households

Kevin Mountford, head of banking at, says high inflation is continuing to cause problems for UK households.

"The sharp sting of high inflation is not new to UK households, as consumers have battled with the rising cost of living over the last 12 months," he says.

"Energy hikes, the soaring price of petrol and the rising cost of everyday basics such as food, have hit households hard. Many workers also have to deal with pay freezes, meaning their incomes are actually dropping in real terms, it is no surprise many feel like their finances are either at, or rapidly approaching breaking point."

Inflation is still having an effect on savings. Basic-rate taxpayers need an account paying at least 5.63% to beat inflation and gain benefit in real terms from their savings, increasing to 7.5% for higher-rate taxpayers.

“Inflation continues to whittle away any hope of a decent return on the nation's savings," says Sylvia Waycot, spokesperson for Moneyfacts.

“This time last year basic rate taxpayers had a choice of 91 accounts to negate the effects of inflation, today there are just five and all are fixed-rate cash ISAs," she adds.

No accounts beat the RPI 5.2% measure of inflation.

Despite calls for interest rates to rise to combat inflation the Monetary Policy Committee kept the base rate at 0.5% for a record 30th consecutive month in September.

Add new comment