Inflation surprisingly rises after cost of tobacco increases

“The cost of goods into Europe from Asia will be significantly higher,” said DP World chief financial officer Yuvraj Narayan.

“European consumers will feel the pain… It will hit developed economies more than it will hit developing economies.”

The inflation data comes as a number of chain retailers put more items on sale earlier. Industry data showed a third of all spending in the weeks up to Christmas was on  items with some kind of offer.

Similarly, the pace of  wage rises has slowed. Official figures published on Tuesday recorded that pay packets were growing at a reduced annual rate than previously – 6.6% compared to 7.3% a month earlier.

Such increases in the annual rate are not what the interest rate setters in the Bank of England will want to see when considering the rates.

The Bank raised the base interest rate  14 consecutive times up to August and then held rates at 5.25%, making lending more expensive, in an effort to bring down price rises.

Another measure of inflation of note to the rate setters has remained the same. Core inflation, which looks at price rises excluding volatile categories such as food and energy, stayed at 5.1%. And food inflation also fell again, to 8% from 9.2% in November.

Markets are expecting the Bank’s base interest rate to come down to 5% in May.

Responding to today’s figures Chancellor Jeremy Hunt said: “As we have seen in the US, France and Germany, inflation does not fall in a straight line, but our plan is working and we should stick to it.

“We took difficult decisions to control borrowing and are now turning a corner, so we need to stay the course we have set out, including boosting growth with more competitive tax levels.”

Labour’s shadow chancellor, Rachel Reeves, responded: “Any rise in inflation is bad news for families who are worse off after 14 years of economic failure.

“Prices are still rising in the shops, with the average weekly shop £110 more than it was before the last general election, and the average family set to be £1,200 worse off under Rishi Sunak’s tax plan. Britain cannot afford another five years of economic failure.”

And the Liberal Democrats’ treasury spokesperson Sarah Olney said: “Today’s inflation statistics will offer little comfort to people across the country that are seeing their pay stretched as the cost of living crisis continues to rage on.”