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Inflation surged to 5.2 per cent during September as households were forced to cope with rising gas and electricity bills.
The Consumer Price Index (CPI) spiralled to more than two and half times the official 2 per cent target to reach the highest level since March 1992, up from 4.7 per cent last month.
However, many economists say today's sharp spike in inflation could mark the peak and forecast that it will start to fall back sharply in the coming months.
The wider RPI measure of inflation, which includes housing costs, rose to 5 per cent from 4.8 per cent in August.
State pensions, which are re-set this month, are pegged to the RPI - so single people receiving the basic state pension will see their weekly payments increase by £4.54 while pensioner couples will receive an extra £7.26.
However, Help the Aged, the charity, said this change was "too little, too late" as pensioners had been the worst affected by the recent surge in the price of food and fuel.
The main driver of September's increase came from gas and electricity bills. Gas prices were 16.6 per cent higher than in August, taking the annual increase to 49.9 per cent while electricity costs rose by 10.3 per cent, resulting in a 30.3 annual rise.
Mervyn Kohler, special adviser for Help the Aged, said: "Although five per cent is large by the standards of recent years, it totally fails to reflect the dramatic increases pensioners are facing in food and fuel.
“Research released last week showed that in reality, our oldest and poorest pensioners face an inflation rate of around nine per cent, far higher than the general rate of inflation."
Gordon Lishman, director general of Age Concern, said: "Although high, the official inflation rate simply does not reflect the reality facing millions of pensioners.
“The Government must respond to these exceptional times by introducing an emergency package of measures to help the most vulnerable pensioners through this winter.”
While fuel costs rose, there was some easing of grocery bills as food inflation fell from to 12.7 per cent from 14.5 per cent in August.
It is widely expected that inflation will start to fall very soon however. Jonathan Loynes, of Capital Economics, said: "The key issue now is just how far and fast it will drop back. Inflation should be back below 4 per cent by the end of the year."
The Bank of England, which has been highlighting the threat of mounting inflationary pressures for most of the year, also said it expects inflation to ease sharply.
Mr Loynes warned that deflation, when prices fall across the board, could be a possibility next year if oil prices keep tumbling at the current rate.
Policymakers, who have been concerned about rising prices for most of the year now believe that the biggest threat comes from the looming recession. The Bank of England, in a move co-ordinated with other central banks around the world, cut interest rates by half a percentage point last week in a bid to boost battered markets.
Andrew Sentance, a previously hawkish member of the MPC, said yesterday: "The severe stresses in the financial system over the last month and the downside news from the real economy have certainly increased the risks of a bigger and more sustained downturn."
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I'm typing this in the dark, with no heating on. The vanilla candle is nice, though! God help me when I'm retired in ten years, on a single state pension. I can't make ends meet now, working 6 days a week!
Garry, Barnstaple, UK
I'd say it's a sure bet that what we are paying for in increased bills is little to do with oil and lots to do with greed driven hedge-fund investment losses which we are now expected to cough for in order to cover director's bonuses. Where are the financial journos when you need them to dig ?
Tezza, Guildford, UK
As Steve said correctly. Price inflation is the result of more money in the system. This is basic economics!
Jeremy, London,
Pensions to rise by £4.54 a week ! but not til next April although Fuel increases are retrospective,and,a lot higher.
Derek Bevan, Huntingdon, England
I posted in the wrong area, re- inflation ,your list came to £10.83 for 2007 and £15.44 for 2008 £4.61 more,I make that an increase of 42.5 % ! so much for the 5.2 %.
Derek Bevan, Huntingdon, England
Have to agree with Ozzy Ozzy - How on earth can Consumer Price Inflaion not feature the biggest consumer item ever purchased. The lack of housing within CPI meant CPI at 1-2% whilst housing doubles inside 3 years. Massive expansion of money supply meant boom followed by bust. Add housing to CPI.
Joe, Geelong, VIC Australia
Forget the Banks, Labour should do something right for once and re nationalise all utility companies immediately .
alan, london, uk
Dead easy for Gordon to solve this one. Put house prices and bank shares into the basket used to calculate CPI. It will be clear then that `over the economic cycle` inflation will be proved to be exactly the same as the `official 2% target`.Time for redn in interest rates & election win next year!
Ozzy, Ozzy, UK
Mr Brown while you are in an intervensionist mood can you get hold of my energy supplier and tell him that huge profits and massive bonus payments are not going to be allowed. The mantra was, sorry, gas prices are tied to oil and must rise. So where are the price cuts or even promises of same?
mike gee, bournemouth, uk
Billions of pounds are miraculously found to bail out the bankers and barrow boys, yet this miserable Government continues to fail those most in need. What an appalling indictment of how pathetic this once great country has become. So much for Gordon Brown's moral compass.
Ian R, London,
Right. Time to raise interest rates. Woops, that's not what's currently happennig is it?
Joe, Manchester,
Earlier today in the Times there was a story about the Norweigan gas pipeline to Britain oversupplying gas to us and this weeknd gas was being sold for £0 a therm - because we have nowhere to store the gas. The "manufacturers" are literally just giving it away! So why are prices to consumers rising?
Melissa, London, UK
When are people going to start understanding that high energy prices are the symptom of inflation not inflation itself. Look in a dictionary Helen Power, inflation is the creation of money and with our current monetary policies we will be in hyperinflation before we know it.
Steve, Hatfield, UK
This is just the beginning.One of the consequences of the global bailout will be huge inflationary pressures. This will be bad for pensioners, people coming up to retirement who will see their pension shrink and anyone who works for a paycheque as their wages will buy less and less. In UK in 18mths
Rupert, London, UK
Strangely, I was under the impression that gas and electricity prices were geared to oil price which, we all know, went as high as $140 a barrel at the time of the increases. The price of oil has now dropped to less than $80 a barreland the price of gas from my supplier has just increased by 34%!
Edward Willhoft, Epsom, UK
Isn't it good if cpi is peaking at the right point for pensioners
trouble is it'll be used to take some money back somewhere else in Brown's version of fairness
rogerb, bridport,
Natural gas (the raw commodity) prices are approximately 10% lower today than their lowest low within the last 4 years. So why are retail utility gas prices "49.9%" higher, and when if at all will they come down to reflect current raw material costs? A new breed of fat cats on the block?
Anthony Wolff, London,
Well done Gordon. Your failure to control the energy companies has caused a great deal of this so, now that you've saved the world's bankers find some similar courage to help us citizens and just as quickly.
Still, it's good to know that us pensioners will have a 5% increase in April - or will we?
A.Williams, Cradley Heath,
This increase in inflation has already been felt by consumers, of which most of whom will have now battened down the hatches for winter and stopped spending.
Competitive pricing in the high street, falling oil and energy prices will reverse the upward trend from now on.
WILLIAM GRIERSON, KIMPTON, UK