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Pressure on households to be laid bare as inflation expected to hit 10%

Fuel prices are expected to have driven inflation higher in July (Joe Giddens/PA)
Fuel prices are expected to have driven inflation higher in July (Joe Giddens/PA)

The rapidly increasing financial pressure on millions of families across the UK will be laid out on Wednesday as experts predict the biggest jump in the cost of living in more than four decades.

Inflation is expected to have hit close to 10% as the price of diesel and petrol rose across the country and gas and electricity prices soared in Northern Ireland.

Consumer Prices Index (CPI) inflation will likely reach 9.8%, according to an average of analysts’ estimates calculated by Pantheon Macroeconomics.

The official figures are released by the Office for National Statistics (ONS) at 7am on Wednesday.

It would be the highest since February 1982, when CPI reached 10.4%, according to ONS estimates.

It would also be a big step up from inflation of 9.4% in June this year. However, worse is yet to come, according to experts.

Inflation is expected to peak later this year at 13.3% and will push the UK into a recession, according to the Bank of England.

The rise will come as the energy price cap – which regulates what more than 20 million households pay for their gas and electricity – rises in October.

The cap is set to hit around £3,635 according to the latest predictions. It is an 84% rise from today’s already record high price cap.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that motor fuel prices rose by 3% month-on-month in July, which will help push up inflation.

Meanwhile in Northern Ireland, SSE Airtricity jacked up the price of the gas it sells to households by nearly 43%, while Power NI increased electricity prices by more than 27%.

Northern Ireland is not covered by the Ofgem price cap as its gas and electricity system is closely linked with the Republic of Ireland.

CMC Markets analyst Michael Hewson said that inflation in the US has started to retreat from its 40-year peaks.

“However, this doesn’t seem likely here in the UK with most forecasts suggesting we could see 10% in the July numbers this week,” he said.

Experts think that the measure could dip in August before soaring again in September and October.

“Looking ahead, CPI inflation probably eased in August largely due to a 7% or so month-to-month fall in motor fuel prices,” Mr Tombs said.

He added that retailers are expected to slow the pace of their price rises soon.

He added: “But the relief for households will be short-lived, due to the impending 80% or so jump in Ofgem’s price cap”. This could push up inflation by nearly four percentage points in October.