UK inflation has increased unexpectedly and for the first time since February last year after rises in tobacco and alcohol prices, according to official figures.
The Office for National Statistics (ONS) said the rate of Consumer Prices Index (CPI) inflation rose to 4 per cent in December, up from 3.9 per cent in November.
Most economists had expected the rate to edge lower to 3.8 per cent.
It comes after alcohol and tobacco inflation hit a high of more than 31 years last month, at 12.8 per cent, largely following the increased tobacco duty in November.
This offset further falls in food prices, which fell back to 8 per cent last month – down from 9.2 per cent in November and the lowest rate since April 2022.
Grant Fitzner, ONS chief economist, said: “The rate of inflation ticked up a little in December, with rises in tobacco prices due to recently-introduced duty increases.
“These were partially offset by falling food inflation, where prices still rose but at a much lower rate than this time last year.”
The surprise increase in CPI will deal a blow to hopes the Bank of England could soon move to start cutting interest rates, with inflation still double its 2 per cent target.
It comes after official data on Tuesday showing that wage growth slowed to its lowest rate for 10 months had increased expectations the Bank could consider cutting rates from their 15-year high of 5.25 per cent.
There are also concerns over the impact of the Red Sea shipping attacks on inflation, as it threatens to push up the cost of oil, gas and goods being imported to the UK.
In response to the figures, founder and CEO of My Community Finance, Tobias Gruber, said: “The Bank of England seems to be losing the battle against inflation, and these shocking figures mean Andrew Bailey may need to contemplate yet another base rate hike, spelling further misery for borrowers.
“The strategy of increasing interest rates, aimed at curbing spending, paradoxically translates to added hardship for millions grappling with the prospect of shelling out hundreds of pounds extra each month on their mortgages.
“It’s a perplexing scenario for borrowers who struggle to comprehend why diligent homeowners are forced to shoulder the burden of getting inflation under control, while the banks continue to reap the benefits. This raises fundamental questions about the fairness of the current economic approach and whether it genuinely serves the interests of hardworking people.”
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