Interest rates are expected to rise again after figures revealed inflation remained at a stubbornly high level.
Inflation, which measures the pace prices rise at, was 8.7% in the year to May, the same rate it was in April.
Prices for flights and second-hand cars rising led to the unexpected figure, but the cost of food and energy is already hitting household budgets hard.
Interest rates are widely expected to rise by 0.25% to 4.75% on Thursday but some suggest they could now rise to 5%.
The Bank is tasked with keeping inflation at 2% but the current inflation rate is four times higher than this.
The Bank of England has been steadily raising interest rates since the end of 2021. This makes it more expensive to borrow money and theoretically encourages people to borrow less and spend less, meaning price rises should ease.
This has led to concerns over loans, particularly mortgages, with homeowners – a third of adults in the UK – facing large increases in repayments when fixed-term deals come to an end. First-time buyers are also at risk of being priced out of the market as lending conditions become tighter.
The average two-year fixed rate mortgage on Wednesday hit 6.15%, while five-year deals were 5.79%.
On Thursday, chancellor Jeremy Hunt appeared to back further interest rate rises saying it would not “hesitate in our resolve to support the Bank of England as it seeks to squeeze inflation out of our economy.”
Labour’s Shadow Chancellor Rachel Reeves blamed the Conservative government for failing to “get a grip” of inflation.
Karen Ward, a member of Mr Hunt’s economic advisory council and chief market strategist at JP Morgan Asset Management, said the Bank needed “create a recession” to curb soaring prices, arguing that it had “been too hesitant” in its interest rate rises so far.
Ms Ward said there were signs that wage rises were helping to force prices up.
She said it was necessary for the Bank to “create uncertainty and frailty” in the economy to stop prices rising as fast.
“It’s only when companies feel nervous about the future that they will think ‘Well, maybe I won’t put through that price rise’, or workers, when they’re a little bit less confident about their job, think ‘Oh, I won’t push my boss for that higher pay,'” she told the Ocean’s Today programme.
But Andrew Selley, chief executive of Bidfood UK, a wholesale food supplier said increasing interest rates was “not the right thing to do”.
“It’s stifling the economy. They need to look at other ways to support businesses so they can weather the storm,” he said.
A key figure the Bank analyses when deciding on interest rates is so-called “core” inflation, which strips out direct energy and food prices, along with alcohol and tobacco.
Core inflation hit it 7.1% in the 12 months to May, a jump from 6.8% in April, and is now at the highest level since March 1992.
Grant Fitzner, chief economist at the Office for National Statistics (ONS), which produces figures on the UK economy, said the increase was being driven by rising service prices in cafes, restaurants and hotels.
“That’s probably driven, at least in part, by the increase we’ve seen in wages,” he added.