The increase for the 12 month rate of inflation to August 2021 is the largest ever recorded increase in the CPI 12-month inflation rate, the Office for National Statistics (ONS) says.

In July CPI inflation fell from 2.5% to 2%.

ONS said its CPI records, which began in January 1997, show the increase in August to be the largest on record but much of the increase was due to temporary factors, such as the lack of an 'Eat Out to Help Out' government campaign this August.

Via the 'Eat Out' scheme last August, the government subsidised restaurant and cafe meals to encourage people to return to the hospitality sector.

ONS said the change this August was likely to be only temporary although some experts have predicted inflation could still top 4% this winter.

On a monthly basis, CPI increased by 0.7% in August 2021, compared with a fall of 0.4% in August 2020.

The sister Consumer Prices Index including owner occupiers' housing costs (CPIH) rose by 3% in the 12 months to August 2021, up from 2.1% in the 12 months to July.

The sudden rise in inflation was fuelled partly by the lack of an 'Eat Out to Help Out' government campaign this year so prices for eating out were accordingly higher.

ONS said the biggest upward contribution to the change was mostly a technical 'base effect' because of the impact of discounted restaurant and café prices in August 2020 and reductions in Value Added Tax (VAT) across the hospitality sector.

The largest other upward contribution to the August 2021 CPIH 12-month inflation rate came from rising transport costs with further large upward contributions from restaurants and hotels, housing and household services and recreation and culture.

Football admissions became available again to the index in August 2021, meaning that there are no more CPIH items identified as unavailable because of lockdown restrictions.

Neil Messenger, director – client and markets, Financial Planning from Abrdn, said: “After a dip in July, the inflation rate has once again returned to month-on-month growth, continuing its upwards march to what is forecast to be a 4% peak by the end of the year.

“While the Bank of England still expects rising rates to be temporary, savers need to be doing what they can now to ensure the value of their cash keeps pace with, or exceeds, inflation. With rock-bottom interest rates, inaction could risk their funds losing value in real terms. For every point inflation creeps up, their hard-earned pound buys that little bit less.”