UK inflation has risen to 3% - the highest level for five years, figures released by the Office for National Statistics show.

It comes as households already face rising airfares, fuel and electricity prices.

With the average pay packet only growing by 2.1% in the past year, it means prices are rising faster than earnings.

Speaking in The Independent, Laith Khalaf, a senior analyst at Hargreaves Lansdown, said:

“The pound in your pocket is depreciating, as the rising price of goods continues to chip away at its value. Consumer spending remains remarkably resilient in the face of inflationary pressures and weak wage growth, but the current squeeze on household budgets is a slow burner, as it takes some time for economic reality to hit home," he said.

"Employment remains high and borrowing costs are low, for the time being at least."

The pound rose against the dollar on Tuesday morning on predictions that rising inflation would increase pressure on the Bank of England to raise interest rates.
The Bank of England said last month that UK interest rates are likely to rise “over the coming months” in order to curb inflation, preparing the ground for the first rise in the cost of borrowing in a decade.
Governor Mark Carney must now write a letter to Chancellor Philip Hammond explaining why inflation is climbing so rapidly.