12 May 2011

Energy Prices Forecast to Rise

The latest inflation report brought grim news to consumers already struggling with energy bills, as it is expected prices could continue up.

The Bank of England predicts gas prices could increase by 15 percent and electricity by 10 percent causing energy bills to hit £1,279 a year.

This increase would mean households would have to budget for an extra £148 on their bills, following the other recent price hikes in March which added £63 onto the average energy bill.

"This is grim news for consumers,” commented Tom Lyon, uSwitch energy expert.

"Two suppliers have already hinted at more price rises, but this warning from the Bank of England seems to bring a second round of energy price hikes a step closer.”

The report by the Bank of England indicated energy prices have been a major influence on CPI inflation.

It is likely inflation will reach 5 percent this year, making it harder than ever for households to make their finances cover the cost of living.

This news has placed further pressure on the Bank to raise the base rate from 0.5 percent to help savers and investors, although this would worsen the situation for those struggling to meet debt repayments.

"Whilst savers and investors are looking to prevent inflation eroding their money it is important to choose the right type of investment vehicle to shield your savings from rising inflation,” said Karen Barret, unbiased's chief executive.

Meanwhile, strategies are being implemented to ensure vulnerable households are able to reduce their energy costs, with the distribution of smart meters by E.ON.

According to Consumer Focus, there will be three million smart meters in British homes by 2014, to help households focus on ways to reduce these energy bills.

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