Rising cost of foreign holidays sees inflation soar to four-year high

The rising cost of foreign holidays and computer games has helped drive up the cost of living as inflation hit its highest level in nearly four years.

The rise is likely to raise pressure on the Bank of England to consider increasing interest rates beyond 0.25% when its Monetary Policy Committee meets later this week.

The cost of package holidays in particular hiked as other currencies gained strength against the pound following the collapse of sterling after the Brexit vote.

May saw the Consumer Price Index (CPI) measure of inflation exceed economists' expectations yet again as it reached 2.9% rather than stay level, as experts had predicted, with the 2.7% seen in April.

The increase in the cost of living remains well above the Bank's 2% target.

Notable rises that pushed up the cost of living between April and May included:

  • Recreational and cultural goods and services - including holidays abroad - which overall rose 0.9%

  • The cost of package holidays alone was up 0.6%

  • The cost of games, toys and hobbies shot up 2.7%

  • Computer equipment also rose, particularly in areas like data processing which saw costs rocket 3.4%

  • The price of clothes jumped by 0.6%

  • Price hikes from utility companies - notably SSE and E.ON - sent the cost of electricity soaring 4%

  • Decorating costs pushed household goods and furniture was up 1.2% overall

A drop in fuel pump prices and a fall in airline prices meanwhile eased the pressure on the cost of living.

Petrol fell 1p to 116.4p per litre while diesel also dropped 1.6p to 118.7p per litre.

The Retail Price Index (RPI), a separate measure of inflation which includes council tax and mortgage interest payments, reached 3.7% last month, up from 3.5% in April.