According to official figured inflation has unexpectedly risen to 4% for the first time since February 2023, most economists had expected the rate to fall to 3.8%.
Inflation has risen due to a rise in alcohol and tobacco prices and the Office for National Statistics (ONS) said the rate of Consumer Prices Index (CPI) inflation rose to 4% in December, which is up from 3.9% in November 2023.
Tobacco and alcohol inflation has risen to its highest in more than 30 years in December followed by the rise of tobacco duty the month before.
Tobacco prices soared by 16% year-on-year in December and alcohol inflation rose to 9.6% following the Chancellor’s November’s autumn statement.
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.”
There are concerns that attacks in the Red Sea by the Iranian backed Houthis militants on commercial vessels has impacted inflation as the cost of oil and gas and goods being imported to the UK could see a price rise.
“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.”
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.”
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