Inflation stable for now, but a long list of rises for consumers points to 5.5% by autumn

THE cost of essential household items has continued to rise, despite inflation remaining stable at a two-and-a-half-year high, figures have revealed.

While the Consumer Prices Index (CPI) stayed at 4.5 per cent in May, the highest level since October 2008 according to the Office for National Statistics (ONS), the figures contained big rises in food and alcohol, which were only offset by a sharp fall in air fares as the Easter effect unwound.

The statistics sparked a stark warning last night from economists, who said the latest figures for May represented a pause for breath before inflation started to soar again towards 5 per cent in the autumn.

A whole range of foodstuffs saw sharp price rises, with meat up by 5.1 per cent over the past year, fish by 11.4 per cent, bread and cereals up by 5.8 per cent, mineral waters, juices and soft drinks by 10.3 per cent and chocolate, confectionery and jams by 7.5 per cent.

Alcohol, tobacco and the cost of eating out and staying in a hotel rose at a record pace, while petrol prices were also at record levels.

Scottish Power has increased its gas tariffs by an average of 19 per cent from 1 August, with electricity going up by 10 per cent on the same date, broadly in line with an earlier warning from Bank of England governor Sir Mervyn King that domestic energy prices could rise by up to 15 per cent this year.

He also said inflation would hit 5 per cent by the autumn, but after the latest CPI figures there are predictions prices may be rising even faster by then.

Jonathan Loynes, an economist at Capital Economics, predicted further rises in food prices and hikes in gas and electricity bills "to take the headline inflation rate above 5 per cent, with the danger of it creeping up above 5.5 per cent by late summer".

However, he predicted inflation would fall sharply next year as the impact of January's rise in VAT to 20 per cent falls away, meaning the Bank of England should hold its nerve and not raise interest rates. The Bank has so far resisted pressure to curb inflation - keeping interest rates at a record low of 0.5 per cent - as wage growth remains subdued.

The figures also added to concerns that as the cost of many essentials continues to soar, it is the poorest people who are bearing the brunt.