David Prosser: Rising inflation, a tough Budget and a base-rate rise will squeeze us all

Outlook Here's some good news: while the inflation figures released yesterday were even higher than feared, there is little evidence the price rises are feeding through into higher pay settlements. And here's some bad news: while the inflation figures released yesterday were even higher than feared, there is little evidence the pricerises are feeding through into higher pay settlements.

That's not a printing error. Assuming you're not in the camp that wants an interest-rate rise – pensioners living off savings income, among others, will feel very differently – the fact that wage settlements have become only marginally more generous this year, despite spiralling inflation, lets the Bank of England's Monetary Policy Committee (MPC) off the hook. It leaves it able to keep rates on hold with the aim of securing the recovery despite being so far off its inflation target. The downside of lower wage settlements, on the other hand, is that even leaving aside the Government's austerity measures, most people in work are getting worse and worse off in real terms.

We will find out today, when the minutes of the last MPC meeting are published, whether there are new voters for an early interest-rate rise, though the chances of an increase in borrowing costs may have receded slightly given the shocks to the global economy from conflict in the Middle East and, even more so, the Japanese earthquake. Unusually, this up-to-the-minute snapshot of the state of monetary policy will coincide with a similar summary of fiscal policy, in the form of the Chancellor's Budget. Might George Osborne offer some comfort to those being squeezed so hard? Don't bet on it. For one thing, Mr Osborne will not want to give any hint he is prepared to deviate from his beloved 'Plan A' for deficit reduction. For another, while the recent data on the public finances had suggested the Chancellor might be as much as £7bn ahead of forecasts onborrowing for this year – giving him a little room for manoeuvre – yesterday's latest figures were £5bn worse than expected – wiping out almost all his margin for error.

There is also a third reason why no fiscal loosening is on the cards today: it would make a monetary-policy tightening more likely. Any suggestion that household finances will be less squeezed by the Chancellor would give the MPC the room to make the adjustments it would no doubt like to, all other things being equal.

There is some help Mr Osborne can offer. Most strikingly, scrapping the 1p fuel-duty increase because of the rising oil price, for example, would cost money, but the Treasury is in line for higher tax revenues from North Sea oil producers. That is about it, however. The squeeze from fiscal policy and high inflation will continue for some time. And interest-rate rises will add to the misery in the end.