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The fallout from the war in Iran cranked up the heat on households last month as energy bills rose – how uncomfortable could inflation get from here?<\/b><\/p>\n
The first thing to remember is that a small amount of price rises is normal. It is the sign of a healthy, functioning economy.<\/p>\n
But with food alone costing a third more than it did four years ago, thanks to a spike in inflation early in the war in Ukraine, it can feel a battle to make ends meet.<\/p>\n
The good news is inflation since the war in Iran erupted has actually been more muted than economists initially feared.<\/p>\n
In part, that’s been because energy prices have not been as aggressive. Also higher energy costs haven’t materialised in items such as food – inflation there, at 1.3%, is at actually at its lowest for close to five years.<\/p>\n
Meanwhile wages and benefits have typically been outpacing inflation this year, lessening the squeeze for many – so far.<\/p>\n
But existing energy cost pressures may push up the likes of food, and other prices, at a faster pace in coming months as they take many months to pass through supply chains.<\/p>\n
In fact, economists expect inflation to take a further step up, to hit around 3.5% later in the year.<\/p>\n