Inflation has risen a surprising amount – to the highest in nearly a year – official figures show.
This means prices are rising even more than at any time since last March, according to data from the Office for National Statistics (ONS) for January.
The consumer price index (CPI) ticked up steeply to 3% from 2.5% a month earlier.
A lower rise to 2.8% was forecast by economists polled by Reuters and by the Bank of England.
The rise has come from more expensive transport and food and non-alcoholic beverages costs.
Flight prices did not fall as much as usual for this time of year.
Meat, bread and cereals in particular became more expensive while an increase in private school fees was another factor, as new VAT rules meant prices rose nearly 13%.
What does it mean for interest rates?
Inflation is now higher above the Bank of England‘s 2% target and will make interest rate cuts less likely.
Traders are pricing in an 82% chance of no rate cut at its March meeting. Two more rate cuts are still expected this year.
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Inflation rises steeply to 3%
But there are some signs that could be welcomed by the rate-setters at the Bank.
Coming in below forecast was services inflation, impacted by rising wages, which rose to 5%, rather than the anticipated 5.2%.
The closely watched core inflation measure – which excludes volatile food and energy prices – increased as expected to 3.7%, up from 3.2% in December.
Just the start
More inflation rises are anticipated throughout the year.
Last month, the Bank of England predicted it would reach 3.7% by the end of the year.
But economic research firm Pantheon Macro said a 4% reading later this year “is far from out of the question”.
Responding to the figures, Chancellor Rachel Reeves said:
“Since the election, we’ve seen year-on-year wages after inflation growing at their fastest rate – worth an extra £1,000 a year on average – but I know that millions of families are still struggling to make ends meet.
“That’s why we’re going further and faster to deliver economic growth.”