Official figures show that UK inflation accelerated again in April to hit its highest rate in 17 months, with the Consumer Price Index (CPI) measure hitting 3.7% - the highest rate since November 2008 and well above the normal rate of 2%. On the Retail Price Index (RPI) measure (which also includes housing costs), inflation rose to 5.3% - the highest rate in 19 years.

The Office for National Statistics (ONS) said food prices in particular have seen rises with the cost of food increasing by 2.6%. This is largely due to the rising transport costs over the last 12 months, as fuel costs have increased by more than 25%. Higher duty on alcohol and cigarettes introduced in April’s budget added to the inflation in April. The ONS added that clothes prices rose too.

Higher inflation has enabled the government to reduce borrowing as a share of GDP, with tax revenues continuing to go up even if real growth has not - so fixed spending totals end up looking smaller both in real terms and in the overall economy. But of course the reverse can also be true because low inflation is another reason why Euro Zone governments have found it so hard to reduce their borrowing and debt. So is it just a convenient coincidence for Britain that inflation is over-shooting, just as government borrowing is at its peak? Of course the fiscal predicament is one reason the pound has fallen so sharply and why prices of imported goods have gone up.

Earlier this month,  Mervyn King - Governor of the Bank of England - wrote a letter to the new Chancellor George Osborne stating that he expected the inflation rate to be higher than expected in the coming months but insisted that it would slow down to below the 2% target by the end of the year. He also stated in his letter that he blamed the rising fuel prices, the rise of the VAT and the fall of the pound, but is confident that the rising inflation rate will not be permanent.

Savers have been having a rough ride thanks to a combination of very low interest rates and the rising inflation, and although the interest rates are unlikely to rise anytime soon, a small number of saving accounts offering interest rates of up to 5% are still available.