Inflation in the UK climbed to 9.1% in May, according to the Office for National Statistics (ONS).

The latest figure is the highest consumer prices index (CPI) 12-month inflation rate in the National Statistic series, which started in January 1997.

Last month, the ONS reported inflation hitting 9% in April, the sharpest rise in 40 years.

The latest figure is driven by increasing prices for food and non-alcoholic beverages, compared with falls a year ago, resulting in the largest upward contribution to the change.

Earlier this month, the Bank of England (BoE) increased the base rate by 25 basis points to 1.25%.

The Monetary Policy Committee (MPC) voted by a majority of 6-3 to increase the bank rate by 0.25 percentage points, to 1.25%. The members in the minority voted to increase the bank rate by 0.5 percentage points, to 1.5%.

The increase marks the fifth base rate rise since December 2021 after a decade of historic lows.

At the time of the rise, the committee said it expected inflation to be over 9% during the next few months and to rise to slightly above 11% in October. 

The increase in October reflects higher projected household energy prices following a prospective additional large increase in the Ofgem price cap.

Last month, MPC member Michael Saunders said that, in his opinion, inflation may exceed the 10% peak forecast for Q4 2022 in the latest monetary policy report (MPR).

Saunders explained that the MPR forecast assumes several economic factors, including weakness in spending, cuts in employee hiring – with unemployment rising – and supply chain problems easing.

The report forecast expects inflation to fall to “slightly above” 2% two years later.

However, Saunders details a belief that demand will be more resilient than the MPR forecast calculates.

Money.co.uk personal finance expert James Andrews describes the latest rise as a “financial earthquake for millions of households”.

“It is the inflation people cannot avoid that is really hurting. Fuel prices are at record highs while food prices have seen the biggest increase in over a decade. And that’s before we even get to gas and electricity prices. The impact is already being felt, with 60% of adults saying they’ve been forced to cut back on discretionary spending and 21% borrowing more than they did this time last year.”

Andrews says that borrowing costs “pose a major long-term risk”.

“Not only do mortgage payments represent a huge and unavoidable expense, but homeowners fearful of further rate rises will also naturally look to lock in the best deal they can now as rates climb in concert with Bank of England interest rates.”

“Anyone approaching the end of a fixed-term deal should be scanning the market to see if it might be worth paying the Early Repayment Charge to switch sooner.”

“This will have an impact on consumer confidence as households prioritise home loans over non-essential spending, which is why businesses are on high alert too,” he adds.

Shaw Financial Services Lewis Shaw suggests that neither the BoE nor the UK government has “a plan, strategy or coherent policy for the worst cost of living crisis facing Brits for more than a generation”.

Shaw says: “If someone doesn’t get a grip of this soon, we’re in for a world of pain. The only thing going down is the money in people’s pockets, yet we’ve got politicians and the governor of the Bank of England saying there must be wage restraint. It’s difficult to know what level of reality they’re operating in.”

Meanwhile, LiveMore managing director of capital markets and finance Simon Webb comments: “The Bank of England is under pressure to tighten monetary policy even further and inevitably lift the base rate throughout the rest of this year and potentially into 2023.” 

Webb suggests homeowners can beat inflation by taking out a long-term fixed rate mortgage keeping their payments the same each month while the cost of living goes up. 

“I’m not just talking about five-year fixed rates but fixing for 10 or 20 years or even fixing for the whole life of the mortgage. In a rising interest rate environment, it makes perfect sense to fix,” he adds.