The economists were right. For months now, they have been warning that the Brexit vote and the subsequent fall in the pound would drive up prices. Today's figures from the Office for National Statistics confirm that consumer prices are rising at their fastest rate for more than three years.
According to the ONS, the Consumer Prices Index (CPI) jumped to 2.3 per cent in February, up from 1.8 per cent in January and above the Bank of England's 2 per cent target. Food prices recorded their first annual increase for more than two-and-a-half years, reaching 0.3 per cent higher in February than a year earlier.
With the prospect of an interest rate rise now on the cards, households are facing the first real squeeze in their incomes for some time. With prices increasing faster than earnings (average earnings in January rose by just 2.2 per cent), this is bad news for people already struggling to get by. The last time pay was below the rate of inflation was in October 2014.
Here's what the experts have to say.
Vince Smith-Hughes, retirement expert at Prudential, said: 'These rising inflation figures will dismay pensioners who are living on a fixed income or drawing down an income from their pension fund. Rising inflation hits retired people harder than others because they spend a disproportionate amount of their income on fuel, food and heating. Those drawing down an income will need to think carefully about how much they withdraw from their pensions. Increasing withdrawals to pay for higher food and fuel bills means they run a greater risk of exhausting their pension savings.'
Kate Smith, head of pensions at Aegon, said: 'Another month, another rise in price inflation. This should set alarm bells ringing reminding people that their buying power can change over a relatively short period of time and this can be particularly hard for those on fixed incomes, including many pensioners. Increasingly people are living 20 or more years in retirement and even low-level inflation can erode the value of retirement income over time. In under 20 years the value of £100 has more than halved, which could severely restrict pensioners’ spending power and quality of life.'
Moneyfacts said: 'Returns are creeping up - but only one of 793 openly available savings accounts matches or beats inflation. That one requires savings to be locked in for some time. The government's help for savers is a "market-leading" bond, available from NS&I from April. Even that three-year deal is now outstripped by inflation and the picture could worsen if the inflation rate keeps rising. Wages had grown faster than prices for a while. For those who put some of that money aside, the reward may now not match the endeavour.'
Sean McCann, chartered financial planner at NFU Mutual, said: 'Beleaguered savers are being hit in their pockets and hit in their bank accounts. Inflation means the cost of filling up the car or doing the weekly shop will cost more and, thanks to historically low interest rates, money in the bank or building society is being eroded every day. There are alternatives for people looking to grow their nest eggs – not least ISAs where savings are sheltered from tax and can be moved from cash to a range of other investments - and back again - without affecting any of this year’s allowances. Those who are looking to invest in something with greater potential for growth, such as a stocks and shares ISA, but are nervous about the markets should consider transferring a bit at a time. Regular investments can help to reduce the impact of sudden market swings.'
Russ Mould, investment director at AJ Bell, said: 'CPIH, which includes owner occupier housing costs, is now at its highest level since September 2013 and is at exactly the same level as wage growth meaning inflation will start to wipe out any advance people are seeing in their wages.
“The question now is whether this data will prompt a move from the Bank of England on interest rates. The 8-1 vote last week not to raise rates show that it is clearly of the view this is a transitory spike caused by the weak pound and the increase in the oil price. However, if oil stays where it is at $51 then oil will be flat year on year by Q4 and the effect will start to drop out of the transport element of inflation which was the largest contributor to the increase in February. The Bank of England and OBR see inflation peaking at 2.8 per cent and it will be wary of making an increase while wages are falling and inflation is increasing, so we are unlikely to see any knee jerk reactions from Mark Carney and his team.'
Helen Nugent is Online Money Editor of The Spectator