Petrol and clothing price rises mean CPI inflation creeps up to 2.9% Inflation up from 2.7% in May to highest level in 14 months Households suffer falls in spending power as wages increase at only 1.3% Savers under attack as NO savings account pays a rate that negates effect of inflation By Adrian Lowery British households are facing escalating costs of living it was revealed today, as official figures showed the rate of inflation increased to 2.9 per cent in June, the highest level in 14 months. The Office for National Statistics said the rising prices of petrol and clothing had been the main factors in taking the consumer prices index measure of inflation up from 2.7 per cent in May. The figure shows that price rises are continuing to erode consumers' spending power as they significantly outstrip wages, which increased by an annual rate of just 1.3 per cent in the three months to April. Savings are also under attack, with no standard savings account paying a rate anywhere near to 2.9 per cent - either before or after tax. Consumer prices index inflation is back to levels of 12 months ago. The June rate is the highest since April 2012, with the ONS saying inflation was prevented from climbing higher by falls in the prices of fruit, vegetables, bread, air fares and package holidays.. It said clothing and footwear prices fell 1.9 per cent month on month, much less than the 4.2 per cent fall a year ago, as retailers started their summer sales with less generous discounts. Pressure on motorists increased, with petrol and diesel prices both rising by 1.1p per litre, compared with price falls a year earlier. The Bank of England has forecast inflation to fall back later this year when commodity prices decrease and bill hikes ease - but economists have warned that if the pound's recent weakness persists, that could deliver a fresh burst of imported inflation. The June inflation figure is the highest in 14 months. Sterling last week fell to a near three-year low against the dollar and is at low levels historically versus the euro. A weak pound means the cost of buying goods from abroad rises. Samuel Tombs, UK economist at Capital Economics, said the rise in inflation 'will be greeted with some relief [at the Bank of England].' To beat inflation, a basic rate taxpayer needs to find a savings account paying 3.63 per cent, while a higher rate taxpayer needs to find an account paying at least 4.83 per cent. Of the 817 ISA and non-ISA accounts in the market today, there is not a single account that will negate the effects of tax and inflation. Just one year ago, there were 156 ISAs and 122 non-ISA accounts that beat tax and inflation out of a total of 1,122 accounts. The effect of inflation on savings means that £10,000 invested five years" ago, allowing for average interest and tax at 20 per cent, would have the spending power of just £8,846 today. Sylvia Waycot, Editor at Moneyfacts.co.uk, said: 'The tragedy of savings accounts that don't keep pace with tax or inflation is that normally cautious people end up taking risks they would not normally dream of with their hard earned money. Stock market investments can return equally sizable losses or profits, which is why they appeal to those who have an appetite for some risk. Watching the spending power of savings diminish, especially if it is needed to supplement income, is today causing heartbreak for many and could lead to escalating risk in the search for a return. He added: 'It seems likely that June's inflation figure will represent this year's peak. Indeed, with leading indicators pointing to a fall in core inflation in the second half of this year, we think that CPI inflation is likely to fall back to the 2 per cent target by the end of the year. 'Accordingly, there's nothing in the inflation outlook to dissuade the Bank's monetary policy committee from pressing ahead with more formal "forward guidance" at next month's crucial MPC meeting.' The Bank voted against increasing its £375billion QE programme earlier this month, and minutes of the meeting published tomorrow will show if Mr Carney followed his predecessor, Sir Mervyn King, in voting for more QE. However, Andrew Goodwin at the Ernst & Young ITEM Club said that the tick-up in inflation was 'nothing to worry about'. 'The pick-up in inflation reflects conditions a year ago, rather than what is happening now, when petrol prices fell sharply in June and retailers started their summer discounting early,' he said. Inflation is likely to drop back over the next few months as these base effects soften. There is little sign of any inflationary pressure from the supply pipeline and, with global growth disappointing, we could even see commodity prices soften further. Base effects will also swing the other way in the autumn, when food and domestic energy prices are unlikely to rise at the same rates we saw last year. Nevertheless, we think it is unlikely that we will see inflation move back to the 2 per cent target in the foreseeable future. Price rises for personal care items such as moisturiser and deodorant, and increases in the cost of domestic heating fuel, helped drive inflation higher. But there were falls in the cost of potatoes, fruit, bread, cereals and dairy products, defying economists' expectations of price rises. Air fares and package holidays also fell in June, compared with sharp increases in flight costs in May. Price falls for sofa beds, carpets and settees also helped hold back inflation. A Treasury spokesman said inflation is down significantly from its peak of 5.2 per cent in 2011. Clothing & footwear and transport costs were the two factors that pushed the average price rise across all goods and services to its highest level since April 2012. He added: 'At the same time, to help families with the cost of living, the Government has increased the tax-free personal allowance to £10,000, which will take 2.4 million people out of income tax altogether and save a typical basic rate taxpayer almost £600, and frozen fuel duty, which has kept petrol prices 13p per litre lower than they would otherwise have been.' Today's figures from the ONS also showed that retail prices index inflation, which includes housing costs, rose to 3.3 per cent in June from 3.1 per cent in May. Recently-launched experimental measures of inflation - CPIH, including housing costs, and RPIJ, which was created to iron out the gap formed by the different methods of calculating the price of goods - both stood at 2.7 per cent in June.