Sudden spike in inflation set to cost average family as much as £700

A sudden spike in inflation is set to cost the average family as much as £700, a think-tank has warned. 

A report published today by the Resolution Foundation warns that inflation is on course to rise above 4 per cent in the third quarter of the year. 

The spike – driven by supply chain bottlenecks and global demand for commodities and raw materials – will mean household incomes won’t stretch as far in the shops, leaving them £700 out of pocket. A 4 per cent inflation rate would also be twice the Bank of England’s forecast from May, the organisation said. 

Out of pocket: The inflation spike will mean household incomes won’t stretch as far in the shops

One manufacturer told the MoS that consecutive cost increases over recent months would force up shop prices in many sectors, leading to unavoidable price increases later this year. 

Policymakers have said the surge is likely to be temporary. But James Smith, research director at the Resolution Foundation, said the squeeze on real incomes would be ‘a significant threat to the strength of our current recovery’. 

‘With the US experiencing the fastest rise in inflation in nearly half a century, and the UK also experiencing sharp increases, many people are getting increasingly worried about a possible price spiral,’ he said. 

‘The temporary nature of this inflation spike means the Bank can look through it and avoid premature rate rises. But the £700 hit to living standards it will bring means households and the Government cannot afford to ignore it.’