Cost Of Living To Remain High In UK Homes

Inflation is expected to remain far above target today as spiralling energy bills continue to squeeze household budgets.

The consumer price index (CPI) rate of inflation is forecast to come in at 5.1% for October, slightly down on the three-year high of 5.2% the previous month .

But it is still more than double the Government's 2% goal - and comes on the back of forecasts that unemployment figures also look set to soar further.

The biggest pressure on British households for the month is tipped to once again be rises in gas and electricity bills.

Npower and EDF both introduced tariff hikes in October, following previous rises from British Gas, SSE, Scottish Power and E.ON.

There is expected to be some relief at the checkouts with heavy discounting campaigns from food retailers, including the UK's biggest supermarkets, which have been engaged in an aggressive price war.

But the figure will still be high enough to trigger an explanation from Bank of England governor Sir Mervyn King, who will be at Buckingham Palace to be formally knighted by the Queen when the CPI rate is released.

The Bank is expected to slash its forecasts for growth and inflation in its quarterly inflation report on Wednesday, as a raft of key indicators all point towards the economy heading into reverse.

The weaker growth outlook is likely to push down the inflation projection - but this will be slightly offset by the impact of the £75 billion round of quantitative easing unleashed in October.

But evidence suggests the slight decline in the CPI rate will be the start of an extended, marked downward trend as the impact from VAT hikes drops out in 2012 and energy prices stabilise.

Elsewhere, the British Retail Consortium (BRC) said shop price inflation fell back markedly to 2.1% - its lowest point this year - from 2.7%.

The BRC said the dip was down to a supermarket price war triggered in October by Tesco's £500 million price-cutting campaign.

Tesco's biggest rivals soon responded with their own schemes, including Sainsbury's Brand Match campaign and Asda slashing prices at the petrol pumps.