The increase, which was in line with economists’ forecasts, marks the fastest rise since March and the second consecutive monthly increase.

On a monthly basis, consumer price inflation (CPI) edged up by 0.1%, following a 0.6% rise in October.

Core CPI, which excludes volatile items such as energy, food, alcohol and tobacco, also accelerated to 3.5% from 3.3% in October.

Services inflation remained at 5%, while rising costs for fuel, clothing and event tickets contributed significantly to the overall increase.

The Bank of England aims to keep inflation at 2% and uses interest-rate changes as a key tool to achieve this goal.

However, with the Bank’s next rates decision set for tomorrow (19 December), most analysts predict that rates will be held at 4.75%.

Chancellor Rachel Reeves acknowledged the ongoing financial strain on households, stating, “Today’s figures are a reminder that for too long the economy has not worked for working people. I am fighting to put more money in the pockets of working people.”

The UK’s official forecasting body previously projected that inflation could rise to 2.6% in 2025, partly due to measures announced in the October Budget.

Reacting to the news, Daniel Casali, chief investment strategist at Evelyn Partners, said: “The uptick in annual and core inflation from the previous month makes it unlikely the Bank of England (BoE) will cut interest rates tomorrow.

“The monetary policy committee will be wary that services inflation becomes stuck at an elevated level and particularly after this week’s release of the October higher-than-expected average hourly earnings data, which is correlated to services inflation.

“Outside of services, goods inflation came in at 0.4% year-on-year in October and remains a drag on the overall rate of inflation.

“Looking further on, the UK inflation trajectory will be complicated by the demand boost from the Budget at the end of October after the Government relaxed fiscal rules.

“The hike in the National Minimum Wage and Employers National Insurance (both from April) and their impact on encouraging producers to raise prices to maintain profit margins is another consideration for the BoE.”

Scott Gardner, investment strategist at J.P. Morgan-owned Nutmeg, added: “While this reacceleration in inflation figures is concerning, especially after recent contractions in GDP figures, it is unlikely to alter the BoE’s rates decision this week.

“Wage growth continues to be persistent, driven by private sector pay increases, presenting a headache for policymakers at the Bank. This metric, alongside services inflation, needs to come down to convince the BoE that a rate cut is ready.”

Jonny Black, chief commercial & strategy officer at abrdn adviser, said: “After a near-constant decline in 2024, many will hope that 2025 brings more inflationary stability. Yet, the BoE has signalled that the journey ahead may be far from smooth sailing, warning of potential turbulence throughout the next year.

“Alongside other headwinds, the latest Budget from the Government may stir the waters further, as its full impact remains uncertain for now.”

“For savers and investors, particularly those in drawdown, it will be vital to keep a close eye on inflation trends and risk levels to chart a steady course ahead. As always, advisers will play a critical role in this process.”

Lindsay James, investment strategist at Quilter Investors, said: “The BoE has consistently warned that inflation could face upward pressure towards the end of this year before falling more sustainably in 2025, as it laps the steep fall in energy prices that occurred in mid-2023.

“In reality, inflation has been less pronounced than anticipated, with goods inflation remaining muted as oil prices have weakened further.

“Service inflation, however, continues to be the main challenge. But looking ahead, there are reasons to be optimistic that it can be brought under control. Labour market data indicates a softening in vacancies, with the estimated number of vacancies in the UK falling to 818,000 in September to November 2024 – a decrease of 31,000, or 3.7%, compared to the previous quarter.

“This trend, combined with higher National Insurance costs for employers, is expected to bring wage inflation back towards 2-3%. While slower wage growth may be unwelcome news for workers, given wages account for around 60% of costs in a typical service sector business, it will help headline inflation return closer to the Bank’s 2% target.

“If these trends persist, it could pave the way for rate cuts in the UK next year. Markets currently expect just over two 0.25% cuts by the end of 2025, a far more cautious outlook compared to the ECB, where rates are forecast to be reduced between four and five times over the same period.”

Sarah Coles, head of personal finance at Hargreaves Lansdown, commented: “Inflation is staying put for now, like an unwelcome Christmas party guest hogging the sofa into the small hours. The question is whether it can be shifted, or if it’s going to hang around to ruin our plans for months – eating us out of house and home and driving up the cost of everything again.

“There’s every chance this could be the calm before the storm on the shelves, as higher employer National Insurance contributions and a bigger minimum wage from April push up employment costs for supermarkets – who may then pass it on to customers.

“There’s also the impact of rule changes in July, which are likely to push up the cost of imports, and then new packaging rules in October to factor into costs. It means the pain at the tills may be far from over.”