It did not take an economist or the Bank of England to tell people in Northern Ireland that the cost of living was on the increase. What the experts call inflation translates for householders and shoppers into higher prices — without pay rises to match.

Fuel and food are the two frontline areas when it comes to rising costs, but there have also been substantial increases in rates bills and insurance premiums.

And the era of cheap flights appears to be coming to an end, with surcharges for fuel, baggage and, in some cases, even for checking in at the airport.

The only thing coming down in price is housing, and everyone expects the market to fall further. But with banks running for cover at present, mortgages are more difficult than ever to secure.

With international oil and gas prices soaring, however, it is energy which is attracting most headlines at present.

With the cost of a barrel of crude oil having gone up from $66 this time last year to hit a record of $139.89 last week, home heating oil costs have soared.

In Northern Ireland the cost of the typical fill of 900 litres has almost doubled over the past 12 month to around £600.

Electricity and natural gas prices have also been affected by rising world prices, with NIE Energy and Phoenix both insisting they have no alternative but to pass on the rising costs.

Electricity tariffs rise by 14% on July 1, while Phoenix prices went up by 28% on May 1, and neither utility is ruling out further price increases this year.

On the forecourts prices have been going north, with steady rises in the cost of petrol and diesel. Petrol has gone up from 97.4p per litre to 118.1p over the past year, while diesel is up from 97.7p to 131.5p.

Food bills are also on the up, showing an increase of more than 20% over the past 12 months.

University of Ulster economist Michael Smyth said that while things were bad, they are not as bad as they have been.

He said the latest inflation figure of 3.3% compares with the peak of 20% which was reached in 1983. But with the UK rate hurtling towards 4% — twice the target of 2% — the challenge for the Bank of England is whether it dare raise interest rates to put the brakes on inflation.

Richard Ramsey, Northern Ireland economist with Ulster Bank, said that Monetary Policy Committee, which sets interest rates, was walking "a fine line".

He said: "The MPC has to factor in a slowing economy that would benefit from lower interest rates as well as rising inflationary pressures which may require interest rates to be raised.

"Overall, the latest data increases the possibility of an interest rate rise to curb rising inflation.

"This view has been reinforced by May's much stronger than expected retail sales figures and comments by Mervyn King, at last week's Mansion House speech, that the MPC is prepared to take 'whatever action is needed' to return inflation to the 2% target."

Alan Bridle, head of economics at Bank of Ireland in Northern Ireland, agreed that Bank of England policymakers were facing a "high-wire act".

He said: "The MPC needs to address the needs of a slowing economy at a time of rising price pressures. As a result, the consensus on the outlook for interest rates appears to have broken down.

"While many economists are convinced the Bank of England will cut rates before the end of the year, the markets are projecting at least one increase in the official base from the present 5%.

"They can't both be right — so Northern Ireland households and businesses can be forgiven for a sense of confusion over the direction of official rates. However, for those families particularly impacted by developments in the mortgage and unsecured credit markets, such debates are largely academic.

"Borrowing costs have already risen."

As director of the Northern Ireland Exporters Association, Robert Hamilton, is fully aware of the problems affecting manufacturers and distributors.

He said: "The record price of oil is grim news for the business community and we want the Chancellor to abandon plans to raise tax on fuel by 2p in October.

"The rise in oil prices means that the Government collects £400m more in revenue duty than it would have expected.

"When he became Prime Minister, Gordon Brown pledged a strong economy and fairness for all.

"Will he now put this windfall back into consumers' pockets?"