Families are facing a squeeze as inflation hit a five-year high of 3 per cent – with the Bank of England governor warning it has not yet peaked.
The headline CPI rate edged up from 2.9 per cent in August to reach the highest level since 2012 last month.
The increase was driven by food prices and transport costs, according to the Office for National Statistics (ONS).
By contrast, the most recent figure for earnings showed they were going up by an average of 2.1 per cent – meaning workers face a real-terms cut.
But Bank chief Mark Carney admitted he expected the rate of price rises to gather pace again.
Mr Carney told the Treasury Select Committee the peak could arrive over the next couple of months, and it was ‘more likely than not’ he would have to write a letter to the Chancellor explaining why inflation had exceeded 3 per cent.
The headline CPI rate edged up from 2.9 per cent in August to reach the highest level since 2012 last month
Giving evidence to the Treasury Select Committee today, Bank of England chief Mark Carney admitted he expected the rate of price rises to gather pace again
The most recent figure for earnings showed they were going up by an average of 2.1 per cent – meaning workers face a real-terms cut
ONS head of inflation Mike Prestwood said: ‘Food prices and a range of transport costs helped push up inflation in September.
‘These effects were partly offset by clothing prices that rose less strongly than this time last year.
‘While oil and fuel costs continued to rise, overall the rates of inflation for raw materials and goods leaving factories were little changed in September.’
The Retail Price Index inflation rate, which is used to set business rates next year, was 3.9 per cent in September.
The CPI rate matches the level in April 2012, and it was only higher in March that year when it reached 3.5 per cent.
Food and non-alcoholic drinks rose by 0.8 per cent month-on-month in September after falling by 0.1 per cent over the same period last year.
On an annual basis, prices rose by 3 per cent last month, its highest level since October 2013 when it climbed by 3.9 per cent.
Transport costs also put upward pressure on the headline rate in September after recording a smaller month-on-month fall of 1.3 per cent in contrast to a drop of 2.3 per cent in 2016.
Fuel prices also pushed higher, with petrol and diesel both stepping up by 2.5p on the month to 118.2p and 120.1p respectively.
The findings will heap pressure on the government to find more money for public sector workers.
Ministers have already signalled the 1 per cent cap on pay increases is coming to an end.
But unions have been demanding an across the board 5 per cent rise – potentially costing £10billion a year.
The TUC is staging a rally in support of public sector workers tonight.
Food and transport costs put upward pressure on the headline CPI rate in September
Mr Carney told the Treasury Select Committee inflation could peak in next month’s figures, and it was ‘more likely than not’ he would have to write a letter to the Chancellor explaining why it had exceeded 3 per cent
A study by the body has warned police and prison officers will still be hundreds of pounds a year worse off by 2022 even though they are in line for rises above 1 per cent.
A Treasury spokesman said: ‘We understand that families are feeling the effects of inflation and we are helping them with their living costs.
‘We’ve frozen fuel duty, doubled free childcare for nearly 400,000 working parents and cut income tax for 30 million people.
‘Increases to the National Living Wage are also delivering the fastest pay rise for the lowest paid in 20 years.’