The bogeyman of inflation is alive and kicking and there is little that you and I - or the Bank of England - can do but grin and bear it.

The outlook for households, which were already been squeezed, looks about to get even tougher as Consumer Price inflation heads towards 4 per cent in the coming months.

Food price inflation has increased the cost of a typical family's annual shopping bill by about £1,092 in the past year - that's about £3 every day.

There is no sign that the trend is about to reverse as the price of staples such as bread, eggs and rice continue to rise. A sliced white loaf has now rising 20 per cent over the past year, while a bag or rice has soared 93 per cent.

Motorists are also being stung at the pumps, where the average price of unleaded petrol has risen from around 94p this time a year ago to 115p last week while diesel is at 127.9p. If crude oil hits a record of $140 a barrel, prices will rise even higher.

Mortgage costs, meanwhile, are continuing to escalate.

Borrowers with a 5 per cent stake in their home are being forced to pay rates of nearly 8 per cent for new packages - almost double the rate they could have expected to pay three or four years ago.

The average two-year fixed rate stands at 6.75 percent - the highest in a decade.

And there is worse to come. The general view is that the Bank of England will leave interest rates where they are in the months ahead, with inflation set to rise above 4 per cent.

Yet even if the Bank of England leaves things on hold, the indications are that mortgage rates will continue to rise.

As inflation increases, banks are likely to become even more wary about lending money to each other. The result will be that the cost of interbank borrowing, near a record high, will rise further, pushing up mortgage rates.

This, in turn, will further destablise the already rocky housing market. Fears of negative equity, which only a year ago looked far fetched, could become all too real for thousands of families.

Higher inflation will also ravage the nation's savings. If the inflation rate jumps to 4 per cent, higher rate taxpayers will need to earn at least 6.7 per cent gross interest a year before they start to make a positive return after inflation and tax.

A basic-rate payer needs at least 5 per cent.

Some offers provide rates that beat this, but even these figures may understate the problem as they are based on the CPI, the Government's preferred measure.

The real rate of inflation for most households is much higher. Capital Economics, a consultancy, estimates that the average middle-class family is suffering from an inflation rate of 6.3 per cent. That means a higher rate taxpayer needs to be earning 10.5 per cent, just to keep pace with rising prices.

The best consumers can do is prepare for the worst.

As long as wages don't start to spiral, most economists hope that the inflation genie will be forced back in the bottle by next year. Only then can we start to look forward to better times ahead.