Inflation is expected to hit a three-year high when the latest forecasts are announced later today, increasing state benefits and further highlighting the current squeeze on household incomes. September's consumer prices index (CPI) will be used to determine next April's rise in the basic state pension, piling pressure on the public purse but bringing some relief for pensioners. Based on City forecasts for CPI of 4.9%, the basic single state pension will increase by £5 to £107.15 a week, while the joint state pension will increase by £8 to £171.35. Some analysts predict that the inflation figure could even spike at 5.1%. The increase in state benefits will put more pressure on Chancellor George Osborne, who is trying to cut the nation's budget deficit.

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