Increases in gas and electricity prices are likely to force inflation higher over the rest of this year, according to the Bank of England's governor.
Speaking at the launch of a new report, Mervyn King stated that the cost of both energy and food pushed inflation to 4.4 per cent last month, while it is likely to rise again due to new price increases from British Gas and EDF Energy.
He added that the figure could peak at around five per cent in the near future.
"Increases in food and energy bills will intensify the squeeze on real take-home pay, which, for many households, is unlikely to grow this year," he explained.
"These are circumstances in which both consumer spending and house prices are likely to weaken together."
Earlier this month, the Federation of Small Businesses revealed its "deep concern" over the rising cost of gas and electricity in the UK.
He added that growing companies are likely to be affected as much as households due to a number of them now working from home.
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