The severity of the squeeze on family budgets from the rising cost of living over the past year was confirmed yesterday with the latest inflation rise.

There was increasing hope, however, that the worst of the damage to the nation’s pockets from ever-higher utility and food bills may be over, with experts predicting that inflation will fall, allowing for sharp interest-rate cuts.

Higher gas and electricity prices were the main cause of yesterday’s jump in headline inflation on the consumer price index to a worse than expected 5.2 per cent. This was more than double the Bank of England’s 2 per cent target, and the highest since March 1992, at the end of the last recession.

The figures underlined the scale of the recent increases in utility bills, which have stunned consumers. Electricity prices were up 30.3 per cent compared with a year ago, while gas prices were a startling 49.9 per cent higher. Overall, utility bills were 39.5 per cent higher over the year.

Since the start of the year the average family’s annual gas bill has climbed by £272 a year to £829 for a medium-level user on a standard tariff, figures from USwitch, the price comparison website, show. The average electricity bill has risen by £191 to £475, while a typical combined bill has risen by £381, or £31.75 a month, to £1,293 a year.

The vicious squeeze on spending power over the past year was emphasised this month when official figures showed that Britons had all but stopped saving in the second quarter as they struggled to make ends meet. The average person saved a paltry £16 during the three months to the end of June. Average income was £3,826, or £1,275 a month, and average spending in the quarter was £3,810, or £1,270 a month.

There was hope of some respite yesterday for the country’s hard-up families, as economists predicted that the latest leap in the inflation rate was likely to have reached a peak, marking the end of the present run of rapid rises in living costs.

There are already indications that some upward pressures on inflation are waning. Food price inflation fell back to an annual rate of 12.7 per cent last month, from the August figure of 14.5 per cent, as the cost of dairy products dropped. Petrol prices fell by 1.5 per cent last month, cutting the year-on-year increase by one percentage point to 19.6 per cent, from 20.6 per cent in August.

“September’s figure will be the peak in inflation and the key issue now is just how far it will drop back as the food and energy effects which have pushed it up so sharply finally fade or go into reverse,” Jonathan Loynes, of the research consultancy Capital Economics, said. “Steep falls in inflation will help to restore households’ spending power.”

Economists believe that rapid falls in inflation should allow the Bank of England to make further, steep cuts in interest rates in coming months on the heels of last week’s half-point reduction to 4.5 per cent. Capital Economics expects base rates to drop to 2.5 per cent next year.

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