UK inflation has seen a record rise, putting pressure on the Bank of England to lift interest rates. The Consumer Prices Index (CPI) jumped to 3.7% in December, up from 3.3% in November.
The price increase of fuel, public transport and food is pressuring people to live within their means. We asked BBC News website readers how they are coping with high inflation and rising prices.
Nigel Bull, Dorset: 'We are looking at all our costs'
Our family will be affected by government spending cuts and rising prices. We are looking at all our costs and seeing how they can be cut.
We will expect to see less services offered by local government and very likely a hike in our council tax.
It is important that individual people, as well as the country, live within their means.
The most important thing for us is that essentials are paid for first and any luxuries come second.
The luxuries do not have to be brand new either, a lot of our nice things were the result of eBay purchases of good, second hand items.
I earn a moderate wage, have no savings and always have to find ways of keeping our bank finances just in the black before each payday.
A loss of job is always in the equation. We have had to drop down to one wage before, as no one is indispensable, all we can do is keep ourselves flexible and useful whilst we ride this storm out.
Unfortunately neither my wife nor I can do our jobs without a car, so we will be hit hard in the pocket by this.
Everyone will feel the pinch.
Colin McCormick, Plymouth: 'The VAT change has barely touched us'
I'm self employed and work from home, my wife works part time just a few miles away, so we spend very little on fuel for the cars.
The equipment and materials I use for my business will cost more due to the increased VAT rate. However my business is not VAT registered (since it doesn't need to be), and I don't plan on raising prices as a result of the VAT increase.
I do audio and video transfers and editing for domestic and commercial customers, and business is booming, so this year we plan on having a family holiday.
It will be our first holiday in a while, and we know it will be more expensive as a result of the weaker pound.
We've had an increase in our standing order for electricity, but no other bills have risen.
We wouldn't say that food prices have risen much lately either, on the contrary it looks like some commodities such as bread have come down a little. We look for the best deals when we're shopping but that doesn't necessarily mean buying economy products.
For 2011 we expect the business to keep thriving so we're not too concerned that we will be impacted by government cuts nor any knock-on effects.
Dorothy Luxford, Trowbridge: 'The cost of food has rocketed'
As pensioners on a fixed income and not in receipt of any benefits then of course we are not coping well.
We do run a car but as we are both disabled and need to shop, I try to organise my mileage.
The cost of food has rocketed and I defy any supermarket to say different. I do not need buy-one-get-one-free deals, just halve the price, then I can buy other items like fruit and veg.
It costs just as much to cook and heat a home for one, as it does for six, so the costs of utilities are very worrying as is council tax. Please tell me what we get for our council tax money because I am confused? It costs me to take recycling two miles away, surely this should be collected from my home? I could go on.
It does not take a scientist to work out that we owe nothing but are expected to pay to clean up the mess left by the bankers.
Thankfully we are keeping up with our mortgage but we are fearful of the market conditions. The rise in VAT and petrol set our expenses beyond my budget each month. My family is thrifty. We felt squeezed and dare not even go for any holidays. We have a two-year-old son. To cut costs, we decided to turn off heating even though it is winter and instead wear many layers of clothes. My son will wear several layers. At night, if it is too cold, we bring our son to sleep with us so that he will be warm and we don't have to turn on the heating for him. As a result, I do not get a good night sleep. Whenever possible, I use the Freecycle website. I also realised in recent months, people are asking for things rather than giving away items. Christina Spybey, London
People should take control of petrol prices by boycotting petrol companies one at a time. Rather than stop the flow of petrol and create hardship for people who need to travel. Let the company do without the cash flow and let them do the work of bringing pressure on the government to reduce the duty on fuel. Maybe a month without the cash flow from hard working British people will make the right people sit up and take notice. Everyone is fed up of rip off Britain lets do something about it collectively. Edward Martin Luther, Bedwellty Blackwood, Gwent, Wales
Inflation - despite what the official figures say is definitely on the rise - quite quickly. Trust me - when you earn £10,000 a year you're the first to notice, when you earn £30,000 it will be far, far later before you spot it! Jim
Basically if you have a place to stay in the UK i.e. property you are "sorted". There is still only one main financial problem in the UK and it's the price of a house. In the UK you can save up for almost anything you want and buy and it, the problem only arises when you need to find a place to put it. When it comes to a house you have to pay tens of thousands to hundreds of thousands of pounds for a square of dirt that has been there for five billion years. So, no I am not worried too much about prices, except the price of property. It's a complete rip off in the UK. Forget tuition fees. It's rent that is the number one problem for students. At least the university does something in return for the money given to it. My advice for young people is to go to a local university to stop the fat cats getting your rent money and do not buy a house until the prices have fallen into the abyss. John Michael, Cupar, Fife, Scotland
The inflation increase is ridiculously high in 2011. I can understand that the government is trying to save the public sector by saving money so we can get out of the economic crisis. However I feel the costs of living, such as oil and gas prices, have gone through the roof and these prices need negotiating. Henry Wade, Cambridgeshire
Rising energy costs, higher food prices and increasing cost of basic commodities are all beyond our control. How on earth does raising interest rates help anyone? I personally am getting less for more money. Paul Matthews, Colchester
This inflation index is completely meaningless. The cost of everyday items such as food, gas and electricity and insurance are equated against items such as white goods, audio equipment and household items that are purchased perhaps once every five years or more. It would be more honest to produce an index related to the median of consumers and the older generation to indicate accurately the true burden that is being imposed upon this group. This would perhaps show the very clever leaders of our country that we are not all on expense accounts and are forced to pay the results of their rulings, however unfair they may be. John Humphrey, Lancing
How can the Bank of England's monetary unit justify upping the interest rate. The general public have paid through the nose because of the banks' failures. Now they are going to suffer due to the restrictions in place on the public purse. They have had a VAT increase, are paying almost 25% more for fuel this year than last and now they want us to pay more for our mortgages. It's the banks and financial institutions who are profiteering from speculators on the oil, food and money markets. They should be hit first and not the general public. Jason Piers, London
These are commodities consumers can't do without - oil, petrol and the like. People should not be penalised for filling up their vehicles. I'm now driving a 1.2 litre engine car from 2.0 litre engine car. Where is it going to stop? We need to get to work to make a living. There needs to be another way of curbing inflation. You can't control prices in an economy in which you can't control the number of people. The more people there are in a country, the higher demand for items. It's supply and demand. Control the flow of people, then the demand for goods will come down. Alan Augustin, Woking
Our household budget has been significantly cut back as a result of the recession. The threat of rising inflation and interest rates is going to be very difficult to cope with. I work in the construction industry as an architect and have had to survive with a 15% pay cut since May 2009. Whilst we have benefited from the low interest rates on our mortgage we have already had to cut back. The rising cost of living and the potential mortgage increase will have a big impact on my wife and three children. It's going to be difficult to see what we can cut out now. Mark Timms, Exeter