Since late 2021, families have seen a huge drop in disposable income during the cost of living crisis as inflation pushed up prices of food, petrol and household items while wages failed to keep pace.
Inflation hit an all-time high of 11.1% in October 2022, far outstripping the government target of 2%, which has been missed for the last 18 months.
While the crisis has pushed many families onto the breadline, with increasing numbers unable to afford fuel or basic groceries, there is a glimmer of hope on the horizon.
In his spring budget on 15 March, chancellor Jeremy Hunt said one of the government's economic priorities was to halve inflation, which he predicted would happen by the end of the year.
"Despite continuing global instability, the OBR [Office for Budget Responsibility] report today that inflation in the UK will fall from 10.7% in the final quarter of last year to 2.9% by the end of 2023," he said, also announcing a raft of changes that would in future save households money on childcare costs and extending the government's energy price guarantee.
Hunt's inflation prediction is an even further drop than the February outlook from the Bank of England, which predicted inflation would fall to around 4% by the end of this year from its current 10.1%, thanks in large part to a drop in wholesale energy prices.
The declining price of energy is likely to cause consumers' electricity bills fall from the middle of the year, providing much-needed relief from sky-high gas and electricity costs.
However, the Resolution Foundation predicted this week that typical household incomes will actually fall by 4% in 2023-34, suggesting the inflationary drop may not provide much respite.
Read more: Shop prices hit record high – again – and show no signs of falling (The Independent, 3-min read)
When will the cost of living crisis end?
Rising inflation over the past 18 months has seen price hikes on everything from Lurpak to petrol, with inflation hitting a 40-year high of 11.1% in October 2022 and currently sitting at a slightly lower 10.1%.
This is way above the government's target of 2%, a level designed to maintain a balance to protect the economy.
If the rate of inflation goes too high, prices are pushed up and consumers suffer. If it is too low, the economy can become stagnant and hamper future growth.
The government expects to see inflation fall to 2.9% by the end of the year while the Bank of England expects to see inflation at 4% by late 2023, anticipating a continued drop back down to 2% after that, providing a gradual easing in the cost of living crisis.
However, for the average household, there is likely to be a far longer road to recovery.
Food prices remain at record highs despite inflation falling for the third successive month in January as price drops take a while to make their way from suppliers to consumers, meaning people are still paying more for their weekly shop.
Meanwhile, ongoing issues with food supply chains (such as bird flu) are continuing to push up prices of specific goods.
According to the Office for Budget Responsibility, consumer price inflation (CPI) will fall steadily throughout 2023, but with wage growth expected to stagnate or fall over the next year, many households will continue to struggle.
Indeed, the Resolution Foundation said in September 2022 it predicts 3 million more people will fall into poverty in the UK, with household income expected to fall by £1,100 in 2022-23.
Ahead of chancellor Jeremy Hunt's budget, the foundation had warned that people would continue to struggle despite energy costs and inflation falling.
Cara Pacitti, senior economist at the Resolution Foundation, said: “The chancellor will want his upcoming budget to signal a new, lower inflation and higher growth, phase for the UK economy. And there has certainly been some good news with the economy expected to be bigger and borrowing lower this year than feared.”
Following the budget announcement, the foundation tweeted: "The current parliament is set to be the worst on record for living standards changes, with real household disposable income per person forecast by the OBR to still be 5% (£1,200 a year) lower in Q1 2025 than in Q4 2019."
Read more: Cost of living: How much money you need to ‘live with dignity’ (Yahoo News UK, 3-min read)