The inflation rate rose to 3.1 per cent in November, up 0.1 per cent from October when rates were expected to peak.

The Office for National Statistics’ (ONS) figures, published today, revealed that the inflation rate for food and non-alcoholic beverages was up 0.6 per cent on last year, while transport had risen to 0.7 per cent up from 0.38 per cent.

According to the ONS, the rate rise came from air fares, which despite falling between October and November, fell less than a year ago.

Aegon head of pensions, Kate Smith, said: “The consensus was that inflation had peaked so today’s figures are about as welcome as a burst water pipe.

“It also means that next year’s increase in auto-enrolment contributions is more likely to prove tricky as many employees will see their pension contributions rise from 1 per cent to 3 per cent. The ongoing rise in living costs increases the likelihood that people will stop saving in response to the squeeze on their incomes. This would provide short-term relief from inflation, but is storing up problems for the long-run”, Smith added.

Commenting on the results, Hargreaves Lansdown senior economist, Ben Brettell believes that the UK will see the cost of living squeeze continue, due to the effects of a weaker sterling and thinks we can expect Bank of England Governor Mark Carney to hike interests rates sooner than promised.

Brettell said: “Inflation should fall back next year as the currency effect eventually works its way through the figures, though today’s numbers showed factories are still under pressure from higher global oil prices. But with wage growth picking up we should see an end to falling real pay in due course.

“That’ll be of small comfort, however, to households facing a significant increase in the cost of Christmas this year. Some of the biggest contributors to the inflation rate were food and recreational goods such as computer games.”

In addition, Aberdeen Standard Investments chief economist Lucy O’Carroll believes that despite the rates nearly peaking, we can expect to see rising.

“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. But they need to keep consumer spending, the engine of the UK economy, chugging along too. If inflation keeps creeping up, or remains elevated, then the chances of the engine sputtering rise incrementally.”

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