Fast-rising food costs and increasing energy bills have pushed up the UK inflation rate to 5.4% in the 12 months to December, up from 5.1% the month before, according to statistics from the Office for National Statistics.

The last time inflation reached a higher level than this was in March 1992, when it reached 7.1%, and with more gas and electricity rises predicted, it now looks possible that inflation will hit this level again.

To date, consumers have seen their household energy bills remain stable due to the government's price cap, however this is due to be revised on 1 April and as a result, fuel bills could increase by another 50% in the next few months, the energy industry has said.

The ONS has said that, alongside energy costs, increases in prices of furniture, food and clothing also contributed to December's rise in the cost of living.

Paul Dales of Capital Economics said inflation was now expected to hit 7% by April, higher than the predicted peak of 6% that the Bank of England was forecasting when it raised rates in December.

Paul predicts that rates will stay above 4% for all of this year and won't drop to the 2% target until April 2023. As a result, he said the Bank of England's rate-setting Monetary Policy Committee was likely to raise interest rates faster than most people expected.

Meanwhile, the Retail Price Index, an inflation measure which is still widely used by government and some businesses, including for wage bargaining, is already at 7.5%.

Businesses, who face soaring wholesale prices, now face the dilemma of whether to pass on those costs to squeezed consumers.