Shadow Finance Minister Bob Richards has slammed Government for letting inflation escalate and said he was not surprised by the big rise at all.

Meanwhile Chamber of Commerce president Phil Barnett reckons many businesses would rather incur the pain of the increase than pass on the cost to their consumers.

But Finance Minister Paula Cox pointed to the knock-on effect of the increase in oil prices on the production and transportation of food and other commodities as the main reason behind the rise and said that Bermuda needed to cut back on its oil consumption.

"The rising prices for oil and food are interconnected," she said.

"Rising oil prices increase the costs of producing and transporting food and many other commodities. This in turn raises the prices of food and other consumer goods. These are difficult economic circumstances and the long term challenge for the world, including Bermuda, is to explore ways to reshape our economies to operate with less oil."

She said that some consumers had already chosen to counter this rise by driving less and capping the amount of gas they buy, as well as car pooling, while she added Government's introduction of free public transport and a five-percent increase in seniors' pensions later this year would also help to soften the blow.

Ms Cox went on to warn against pricing behaviour that could result in the Island becoming less competitive due to price spirals.

"A closer look at the underlying price trends reveals that the 12-month average rate of inflation is 4.2 per cent compared to 3.8 per cent for all of 2007," she said. "The 12-month average is a more stable measure of the broader impact of price changes. This is the better measure to be used in making inflation-related adjustments to contracts, benefits and other economic values in the current climate."

The United Bermuda Party's Senator Richards said the figures were not unexpected at all with gasoline prices shooting through the roof, but claimed that Government was partly to blame for not controlling its own spending.

"The latest numbers are pretty much outside of the government's control, however, in the longer term the government has not helped itself and it has not been responsible in controlling the things that it can control, so perhaps alarm bells should be ringing in the Department of Finance because I have been talking about this for a long time," he said.

"It complains about the sort of things that it thinks is nit-picking like looking into travel expenses and the cost of consultants and when you add all these things up every dollar that the government spends has some kind of multiplier effect on the economy."

He said the dramatic rise in the inflation rate would hit the pockets of the low-income earners the hardest.

"It is going to be adding to the misery of Bermudians and the usual part of this inflationary cycle is that people cannot keep up with the rises with their earnings, so they have a reduced spending power and effective wealth, so that is going to be the end effect," said Mr. Richards.

"The people at the bottom end of the earnings spectrum are going to be hurt the most."

Mr. Richards said the tourism sector would be one of the areas most impacted by the increased inflation due to the rise in costs for the visitor.

"One of the biggest problems we have in tourism is that things are too expensive here and this can only make things worse," he said.

"A lot of Americans do not want to travel because of the price of gas and airfare tickets and ultimately cruise ships will be too much too and it is only going to make our business model more challenging.

"The inflation rate has gone up comprehensively across the board and it is been driven by imported inflation, but at the same time we have not helped ourselves and have not shown any kind of vision or anticipation."

Mr. Barnett agreed that the rising rate of inflation came as no great shock considering the spiralling cost of fuel, but it did not mean that people were not going to feel the pinch.

"Because of Bermuda's position in the middle of the ocean, it is always going to require significant amounts in costs to ship goods and store them," he said.

"It is really obviously something that everybody is collectively bracing themselves for.

"Retailers and restaurateurs are simply trying to hold strong without passing on the increases in prices to consumers."

He said that not only retailers and restaurateurs would suffer as a result, but also the likes of taxi drivers and water sports operators counting the cost of fuel increases. "It is so wide ranging," Mr. Barnett said.

"Nobody is rushing out to change their menu prices, although stores might have some fluidity to change their retail price depending on what they bring it in at.

"The goal here is to make sure that for everything we get here in Bermuda, we get a perceived value for it."