UK inflation hits two-year high

Inflation in the UK has reached a two-and-a-half year high, primarily driven by the rising price of fuel.

Annual inflation as measured by the Consumer Prices Index (CPI) reached 1.8 per cent last month, the Office for National Statistics (ONS) said, up from a rate of 1.6 per cent in December.

It is the fourth consecutive month that the rate has risen and takes inflation to its highest since June 2014.

Fuel prices hit a two-year high in early February, according to the RAC.

As well as fuel, the ONS said food prices also contributed to the rise in inflation, as prices were unchanged between December and January, having fallen a year ago.

Offsetting these factors, the prices of clothing and footwear fell by more than they did 12 months ago.

The increase in the inflation rate takes it closer to the Bank of England’s target rate of 2 per cent, which was last seen in December 2013.

Inflation is widely expected to pick up this year as a result of the weaker pound, which is making imported goods more expensive.

Earlier this month, the Bank of England said it expected the inflation rate would hit 2.7 per cent next year.

Liz Cameron, chief executive of Scottish Chambers of Commerce, said: “Businesses are expecting rising prices throughout this year and we now know that the Bank of England is expecting inflation to be positioned significantly above the government’s 2 per cent target for at least the next three years.

“There are a number of factors which are pushing prices up, including rising oil prices and exchange rates in the wake of the EU referendum. The danger for business is that they may be forced to pass on rising costs to customers at a time when real income growth, and consumer spending, is likely to slow.

“For some businesses, this will add to the pressure of business rates, the Apprenticeship Levy, new pension responsibilities and the rising cost of the national living wage. That is why we will be looking for a clear sign from the UK government that it is prepared to tackle the costs to business in next month’s budget.”