'We can't cut back anymore': How inflation is straining household budgets as rate remains above 10%

For months, ITV News has been following a cross-section of people in their battle with rising prices. Consumer editor Chris Choi reports

More pressure could be piled on household budgets amid warnings interest rates may rise again as new figures show overall inflation is higher than expected.

Office for National Statistics (ONS) figures released today show inflation has dropped by less than expected, remaining in double figures.

Tracking the impact rising prices are having, ITV News spoke to several people to understand how their budgets are being affected.

Food is up 19.4% in today's official figures - a 45-year high.

For Devon mother-of-three Kate Worby, her family food bill has gone up by almost £87 every month.

"We are constantly watching and constantly looking at that number in the bank and worrying when it gets into the red," she told ITV News.

"Now we can't really cut back anymore without jeopardising nutritional value because obviously we've got to look after the children."

Earlier on Wednesday, ONS revealed that Consumer Prices Index (CPI) inflation fell to 10.1% in March from 10.4% in February.

Nevertheless, it remained higher than experts had predicted as food and drink prices continued to soar.

Economists had forecast it would be 9.8%.

Inflation rates remain high thanks to rising food prices, ITV News' Neil Connery and Shehab Khan explain what this means for interest rates and how the government will react

The high level of inflation continues to keep pressure on the Bank of England regarding interest rates, with inflation still heavily above the 2% target rate.

The ONS revealed food prices increased by 19.1% year-on-year, the sharpest jump since August 1977.

Bread, cereals and fruit prices increased, while the impact of vegetable shortages also continued to weigh on inflation.

This was partly offset by lower fuel costs, with petrol and diesel costs down 5.9% against the same month last year after prices had spiked following Russia’s invasion of Ukraine.

ONS chief economist Grant Fitzner said: “Inflation eased slightly in March, but remains at a high level.

“The main drivers of the decline were motor fuel prices and heating oil costs, both of which fell after sharp rises at the same time last year.

“Clothing, furniture and household goods prices increased, but more slowly than a year ago.

“However, these were partially offset by the cost of food, which is still climbing steeply, with bread and cereal price inflation at a record high.”

Clothing and footwear prices rose by 7.2% year-on-year, although this represented a slight slowdown against February’s data.

Restaurant and hotel prices also continued to rise, at 11.3%, but also saw inflation cool from the previous month.

Jeremy Hunt reacts to the drop in inflation and says the government must continue to drive it down

Chancellor Jeremy Hunt said: “These figures reaffirm exactly why we must continue with our efforts to drive down inflation so we can ease pressure on families and businesses.

“We are on track to do this – with the OBR (Office for Budget Responsibility) forecasting we will halve inflation this year – and we’ll continue supporting people with cost-of-living support worth an average of £3,300 per household over this year and last, funded through windfall taxes on energy profits.”

UK inflation rate from 2020 - 2022. Credit: PA

Kitty Ussher, chief economist at the Institute of Directors, said: “Business remains extremely concerned by the rate of inflation and wants to see it under control.

“While it is a relief that the headline rate of inflation is now pointing downwards again, following the surprise rise last month, the Bank of England’s job is not yet done.”

Martin Beck, chief economic adviser to the EY Item Club, said: “The Club still thinks headline inflation will fall at pace this year, mainly reflecting strong base effects and falling wholesale energy prices, which should feed through into lower household bills from the summer.

“Less expensive energy will likely directly lower inflation, and by reducing businesses’ costs, should indirectly bear down on core and services inflation.

“However, the recent persistence of underlying price pressures poses a risk to just how quickly inflation will fall.”

The latest data also showed the CPI measure of inflation including housing costs (CPIH) dipped to 8.9% for March from 9.2% in February, while the Retail Prices Index (RPI) slowed to 13.5% from 13.8%.

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