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17 October 2011
Last updated at 19:00 ET
Continue reading the main story The September inflation figures, which are due to be released on Tuesday, are crucial in setting various benefits and the state pension.
September's rise in the Consumer Prices Index (CPI) will be used to set things like April's rise in the state pension and Jobseekers' Allowance.
The CPI figure is expected to be close to 5%.
It will be the first time that benefits have increased with CPI instead of the Retail Prices Index (RPI).
Other rates set by the September inflation figures include allowances and indexation for income tax, national insurance, inheritance tax, capital gains tax, disability and maternity benefits, income support and tax credits.
If pensions and benefits do rise by 5%, it will put further pressure on the chancellor, who is battling to reduce the budget deficit, but it will provide much-needed relief to claimants struggling to cope with the rising prices of food and fuel.
The Bank of England has already predicted that inflation will hit 5% this year as a result of higher utility bills, but expects price rises to slow in 2012 and 2013.
All of the six main energy suppliers have announced significant price rises for gas and electricity in recent months.
Energy secretary Chris Huhne hosted an energy summit on Monday, the main outcome of which was advice to consumers that they should check they are on the cheapest available tariff and switch energy supplier if they are not.
Philip Shaw, chief economist at Investec, is predicting CPI will hit 5.1%, which would be the highest since September 2008.
"September should be a nasty month for inflation, with the CPI rate set to rise sharply from August's already elevated 4.5%," he said.
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September's rise in the Consumer Prices Index (CPI) will be used to set things like April's rise in the state pension and Jobseekers' Allowance.
The CPI figure is expected to be close to 5%.
It will be the first time that benefits have increased with CPI instead of the Retail Prices Index (RPI).
Other rates set by the September inflation figures include allowances and indexation for income tax, national insurance, inheritance tax, capital gains tax, disability and maternity benefits, income support and tax credits.
If pensions and benefits do rise by 5%, it will put further pressure on the chancellor, who is battling to reduce the budget deficit, but it will provide much-needed relief to claimants struggling to cope with the rising prices of food and fuel.
The Bank of England has already predicted that inflation will hit 5% this year as a result of higher utility bills, but expects price rises to slow in 2012 and 2013.
All of the six main energy suppliers have announced significant price rises for gas and electricity in recent months.
Energy secretary Chris Huhne hosted an energy summit on Monday, the main outcome of which was advice to consumers that they should check they are on the cheapest available tariff and switch energy supplier if they are not.
Philip Shaw, chief economist at Investec, is predicting CPI will hit 5.1%, which would be the highest since September 2008.
"September should be a nasty month for inflation, with the CPI rate set to rise sharply from August's already elevated 4.5%," he said.
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