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  1. ITV Report

UK inflation hits five-year high as household squeeze continues

  • Video report by ITV News Consumer Editor Chris Choi

UK inflation has risen to 3% - the highest level for five years, figures released by the Office for National Statistics show.

It comes as households already face a triple-whammy from rising airfares, fuel and electricity prices.

With the average pay packet only growing by 2.1% in the past year, it means prices are rising faster than earnings.

The rise will put pressure on the Bank of England to raise interest rates in November.

Governor Mark Carney must now write a letter to Chancellor Philip Hammond explaining why inflation is climbing so rapidly.

The Government has set an inflation target of 2%, with protocol dictating Mr Carney must contact the Chancellor if inflation exceeds 3% or falls short of 1%.

Food prices and a range of transport costs helped push up inflation in September.

A rise in fuel prices after Hurricane Harvey disrupted US oil production adds to pressure from a 12.5% electricity price hike by British Gas that took effect from mid-September.

ONS head of inflation Mike Prestwood said: "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 cost of living ticked up to 2.9% in August, bringing to an end a momentary pause in June and July at 2.6%.

It came as annual growth in earnings remained static at 2.1%, both including and excluding bonuses between May and July.

Energy prices have been hiked leaving households further out of pocket. Credit: PA

There is growing speculation interest rates could rise as early as November.

But while an interest rate hike could go some way in reducing inflation, there are warnings that the UK economy is not yet strong enough to handle a rise.

The International Monetary Fund, which cut its forecast for UK growth this summer, recently raised the the growth outlook for every advanced economy aside from Britain amid Brexit uncertainties, raising further fears over domestic performance.