By Sunita Patel-Carstairs, Business Reporter
The rate of inflation rose to a near six-year high of 3.1% in November – led by a hike in the cost of air travel and computer games.
It was the highest Consumer Price Index measure of inflation (CPI) since March 2012, and shows that the squeeze on consumers intensified in the run up to Christmas as the cost of living continues to increase well ahead of wage growth.
The reading remains above the Bank of England's inflation target of 2% – and slightly above economists' expectations that it would remain static at 3%.
The Bank raised interest rates to 0.5% in early October to help tackle inflation.
Governor Mark Carney must now pen a letter to Chancellor Philip Hammond explaining why the rate missed the Bank's target by more than one percentage point.
CPI measures the growth in price of everyday items including fuel, food, clothing and household goods.
Inflation has been accelerating largely thanks to the collapse in the pound following the Brexit vote, which makes imported goods more expensive.
The ONS said the main upward pressure last month came from transport costs, where prices rose by 0.1% between October and November this year, compared with a fall of 0.3% between the same two months a year ago.
This was largely down to air fares, which fell more slowly by 10.4% this year compared with a larger 13.4% drop a year ago.
Rising prices for food and a range of recreational and cultural goods and services, in particular computer games, also had an upward impact.
Motorists also faced higher fuel costs in November, with petrol up by 1.8p per litre month on month to 119.1p, and diesel rising by 2.3p a litre to 122.8p.
Economists said the inflation rise would mean an expensive Christmas for many households – and did not rule out a further interest rate hike.
Lucy O'Carroll, chief economist at Aberdeen Standard Investments, said: "Some of the latest surveys suggest service sector costs and prices are rising. Given how dominant services are in the economy, this could feed through to inflation overall. That means that further interest rate rises are definitely not off the table.
"The Bank of England has a tricky tightrope to walk. Too much inflation could threaten the Bank's credibility and therefore its grip on the economy."
Laith Khalaf, senior analyst at Hargreaves Lansdown, added: "It's going to be a costly Christmas for many, with prices significantly higher than last year, and wages falling behind. That's particularly the case given that inflation is evident across all categories of festive fare, namely food, alcohol, clothing and recreation."
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Mel Stride, financial secretary to the Treasury, said: "Inflation is expected to fall over the coming year, but I recognise families are feeling a squeeze now.
"We are determined to help, which is why the Autumn Budget cut income tax, boosted basic pay by more than inflation and froze alcohol and fuel duties."
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