The Confederation of British Industry warns inflation is likely to remain high for the rest of the year, "severely eating into strained household incomes".

Anna Leach, the organisation's deputy chief economist, says the latest figures show the need to give people "more control over their energy bills". She calls for a national effort to help people better insulate their homes, and says planning decisions for electricity infrastructure should be speeded up.

She adds that the government also needs to "build resilience to price shocks over the longer-term", including by encouraging investment and supporting the development of green infrastructure.

Meanwhile, the British Chamber of Commerce says businesses are facing a squeeze on their operating costs, with two out of three firms telling the organisation they expect to increase prices for customers.

It calls for action, including a review of the Shortage Occupations List - which shows where workers are needed and is used to offer visas to people moving to the UK.

Everything is going up - and there are domestic reasons for this toopublished at 09:45 British Summer Time 20 July 2022

09:45 BST 20 July 2022

Faisal Islam
BBC Economics Editor

The further rise in the inflation rate was driven by petrol and food prices. Food price inflation is now at its highest level since March 2009.

However, the rise in the cost of living was across the board and not solely attributable to energy and the effects of the Ukraine war. Everything is going up in price (apart from used cars and TVs).

As Bank of England Governor Andrew Bailey said yesterday in his Mansion House speech the last "disturbance" to the economy "is a domestic one".

The shrinkage of the labour force is "contributing to inflationary pressure due to difficulty of recruiting" and "increases the risk that the inflation that has come to us from abroad gets embedded in more persistent domestic inflationary pressure".

The headline inflation rate in the UK is already the highest of the advanced G7 economies.

Inflation pressures in the pipeline are now at records, from factories to the service sector.

Much criticism has come the Bank of England’s way in the Conservative leadership campaign. Labour shortages are far more directly in government policy control and yet is barely being discussed in the leadership debate.

The higher rates of inflation will also make the conversation with public sector workers yet more tense.

And in addition, all roads appear to lead to a rise in base interest rates next month of half a percentage point - the biggest rise in nearly three decades.

Car enthusiasts are also feeling the crunch.

Drivers from a car meet in Derby said they're now "thinking twice" before buying fuel - with prices hitting record highs last month.

One owner told BBC Newsbeat: "Every time I put fuel in the car, I have to think - how much money is this costing me? How much do I have to spend on this car for the rest of the month?"

Image source, Getty Images

Energy bills are one of the biggest contributors to inflation currently, as oil and gas prices remain at elevated levels in part due to the war in Ukraine.

Russia is one of the largest exporters of oil and gas but as countries have moved to reduce their reliance of Russian imports, demand for other producers has risen, leading to higher prices.

The war is also contributing to surging petrol and food prices.

Russia and Ukraine are some of the biggest producers in agriculture and food globally and the invasion and subsequent sanctions have disrupted supplies.

Supply chain issues, recruitment challenges and increased wages are also contributing to higher costs for businesses, with many increasing their prices as a result.

Read more here.

Image source, Lib Dems

The political reaction keeps coming in following the news just under an hour ago of that 9.4% inflation rate rise.

Liberal Democrat's Sarah Olney criticises the situation in the Conservative Party - with the ongoing leadership contest. She says it has left a "zombie government" which is failing to respond to the cost-of-living crisis.

""Families and pensioners are being hammered by relentless price hikes yet the Government is nowhere to be found," she says.

"The country can't wait any longer for this Conservative party to play out their horror show leadership contest.

"VAT must be slashed right away to cut prices at the shopping tills and fuel pumps."

The rate of price rises is "bad news for everyone" but poorer households are being hit harder, a think tank warns.

The Resolution Foundation, which focuses on people on lower incomes, says the poorest tenth of households are effectively experiencing an inflation rate of 10.6% - higher than the official rate of 9.4% - because they spend a greater proportion of their income of food and fuel.

But it says soaring petrol prices are also hitting wealthier families.

Image source, Getty Images

The "mental health aspect" of the crisis is not always discussed, says a single mother from Salisbury.

Trying to make ends meet "really grinds you down," Vicky Charles tells BBC Radio Wiltshire. "I listen to the news once a day, then I’m done, and I avoid it."

Vicky takes cold showers in the morning to keep her gas bill down – and says she wastes money on convenience food when she has a lack of “mental capacity” to take time to cook healthy meals.

She says the latest rise in inflation will hit those who were "barely above the poverty line".

Vicky feels the crisis is only being discussed now because those who were "a bit further above the poverty line and thought they were okay, are suddenly not".

A bit more from Annelise Dodds who adds that if Labour were in government it would reach a "fair" pay settlement that is "affordable".

"People are feeling the squeeze", she adds.

"What the government needs to do is not have the fantasy economics from all the leadership candidates, it needs to be engaging in public sector negotiations.

"They shouldn't be engaging in the division which was saw around the rail strikes."

BBC's political correspondent Iain Watson notes that Dodds doesn't say if they'd be offering nurses more than 3.7%.

Image source, Getty Images

Some reaction from Labour's Annelise Dodds who is pushing for "urgent action" from the government.

She's been telling BBC Breakfast: "That jump will be causing huge concern to families up and down the country.

"We need to see immediate action. Government should be taking VAT off energy bills.

"We could take action right now to get people's bills down."

Chief Secretary to the Treasury Simon Clarke admits the current economic situation is "challenging", with global events like the war in Ukraine "taking a toll here at home".

However, he tells BBC Breakfast the government is confident "we will see a marked improvement in 2023".

Asked whether it is fair that millions of public sector workers have been offered a below-inflation pay rise, Clarke says it is "crucially important" to balance the risk of worsening inflation by setting very high pay deals, while also looking after the workforce.

“I think we struck the right balance," he says, adding that the government followed the advice of independent pay review bodies and that workers on the lowest incomes will get the largest increases.

As we've been hearing, prices are rising at their fastest rate for 40-years, with the UK inflation rate hitting 9.4% in the year to June. That's the highest level since February 1982.

The food and transport sectors were the biggest contributors to inflation, with petrol prices rising at a record rate in June.

As we're talking about inflation this morning, let's take a step back and ask: what is it?

Inflation is the increase in price of something over time.

For example, if a loaf of bread costs £1 one year and £1.09 the next year, then that's an annual inflation rate of 9%.

In the UK, this is worked out by the Office for National Statistics, which notes the prices of hundreds of everyday items, known as the "basket of goods"., external

The ONS releases its inflation figures each month, showing how much these prices have risen since the same date last year. This is known as the Consumer Prices Index (CPI).

Inflation rose by 9.1% in the 12 months to May, up from 9% in April.

The Bank of England has warned that UK inflation could reach 11% by the autumn, largely as a result of rising global energy prices.

You can read more about inflation here.

We've been hearing from two women in Derby who have been describing how they are feeling the pressures of the rising cost of living.

Tracy Gibson who runs a food bank and is now on universal credit says her husband lost his job in the pandemic due to mental health.

"We went from a £27k-a-year household to living on Universal credit," she's been telling BBC Radio 4's Today Programme.

"Bills are going up and we're feeling it.

Danni Bello uses her experiences with mental health issues to help run her own business designed to help others.

But she says people are finding it hard to find the money for mental health support which has then presented a cash flow problem for herself.

"I've had to take on three different jobs," she says. "One is a bar job, another is activity leading with children for SEN needs and an internship.

"Little jobs but all so I can live.

"Obviously with the stress of putting energy into so many things and not my business that's a cost on my mental health."

The BBC is focussing on Derby today as we cover the cost of living. It's a city special to its residents but it’s also quite average in various ways, making it a fairly typical example of what’s happening in the UK.

Labour says the inflation figures show the need for more than just "sticking plasters" to fix the economy.

Shadow Chancellor Rachel Reeves says: "Rising inflation may be pushing family finances to the brink, but the low-wage spiral facing so many in Britain isn't new.

"It's the result of a decade of Tory mismanagement of our economy meaning living standards and real wages have failed to grow."

Responding to the latest inflation figures, Chancellor Nadhim Zahawi says: "Countries around the world are battling higher prices and I know how difficult that is for people right here in the UK, so we are working alongside the Bank of England to bear down on inflation.

“We've introduced £37bn worth of help for households, including at least £1,200 for eight million of the most vulnerable families and lifting over two million more of the lowest paid out of paying personal tax."

Here's Grant Fitzner, chief economist at the Office for National Statistics (ONS), on the breaking news on inflation

He's been telling BBC Radio 4's Today Programme it has been driven by higher food and fuel prices.

He says: "We have seen highest annual increase for over 40 years. Over the last year we have seen big increases in gas and electricity charges.

"It is fair to say inflation pressures are fairly broad paced across all categories.

"Looking at producer prices for things like raw materials, they've been softening in the last few months so it is not a universal increase."

Fitzner said businesses have told the ONS they are feeling the pressures.

The cost of your shopping continues to go up. The latest ONS figures show the prices for food and non-alcoholic drink rose by 9.8% in the year to June.

The figure is up from 8.7% in May and the highest rate since March 2009.

The biggest contributors were milk, cheese and eggs, with the price of vegetables, meat and ready meals also increasing.

Rising prices for motor fuels and food were the biggest contributors to the increased inflation rate, according to the Office for National Statistics, external.

Average petrol prices rose by 18.1p per litre in June, the largest monthly rise on record, since 1990.

Meanwhile, the average price of diesel rose by 12.7p per litre.

Prices are continuing to rise at their fastest rate for 40 years, with UK inflation hitting 9.4% in the year to June, according to the Office for National Statistics.

The figure is up from 9.1% in May and at the highest level since February 1982.

We're expecting the latest inflation figures for the year to June in the next few minutes.

Stick with us for the latest.