Prices are rising by 9.1% a year in the UK - the highest rate for 40 years.
The Bank of England has warned inflation might reach 11% within months, as the prices of fuel, energy and food put pressure on household budgets.
Why has inflation risen so much?
Inflation is the increase in the 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%.
- Energy bills are one of the biggest contributors to inflation at present, as oil and gas prices remain at elevated levels in part due to the Ukraine war. After a rise in the UK's energy price cap in April, average gas and electricity prices jumped by 53.5% and 95.5% respectively compared with a year ago.
- Fuel prices are also surging, with average petrol prices hitting 186.59p per litre in June 2022 versus 160.31p in early May, and 130.5p a year earlier. The June price is the highest on record.
- Food prices are also surging as the war in Ukraine squeezes global grain production.
- The governor of the Bank of England has said rising global food prices are a "major worry".
- The costs of raw materials, household goods, furniture and restaurants and hotels are also going up.
- The rate of VAT - the tax paid when buying goods and services - has gone up for some businesses. The government reduced VAT for hospitality and tourism firms during the pandemic, but on 1 April it returned to the standard 20% rate.
- Air passenger duty and vehicle excise duty rates have also increased, as have the cost of postage, and water bills in England and Wales.
- Higher interest rates also make mortgage payments more expensive for some homeowners.
The headline inflation rate is an average, and priced rise in different areas rise at different rates. One food industry boss has warned that food prices could rise by up to 15% this year.
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What's happening to wages?
Average pay increases aren't keeping pace with inflation.
Figures from the ONS show that wages, excluding bonuses, rose by 4.2% between February and April. But when you take inflation into account, regular pay actually fell by 2.2% compared to 12 months ago.
Some parts of the economy facing staff shortages as a result of Brexit and the pandemic have increased staff pay. On 1 April, the lowest-paid saw the National Living Wage rise by 6.6% to £9.50 an hour.
However, since that date, anyone earning more than £9,880 per year (£12,570 from July) has had to pay 1.25p more in the pound in National Insurance contributions as a result of the new Health and Social Care Levy.
Who measures the UK's inflation rate?
Inflation is a measure of the rate at which a range of prices are rising over a given period of time.
In the UK, this is worked out by the Office for National Statistics (ONS), which notes the prices of hundreds of everyday items, known as the "basket of goods".
This is constantly updated. In 2022, items such as tinned beans and sports bras were added, reflecting a rising interest in plant-based diets and exercise.
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 autumn 2022, largely as a result of rising global energy prices.
What can be done to tackle inflation?
The Bank of England's traditional response to rising inflation is to raise interest rates. This can benefit savers, but means some people with mortgages see their monthly payments go up.
The idea is that when borrowing is more expensive, people will have less money to spend. As a result, they will buy fewer things and prices will stop rising as fast.
But when inflation is caused by external forces, such as rising global energy prices, then there is a limit as to how effective UK interest rate rises can be in curbing inflation.