This is the highest figure for the Consumer Prices Index (CPI) since July 2014, when it was also 1.6%.
The ONS said that rises in air fares and food prices, as well as petrol prices, which fell by less than they did a year ago, had been the main contributors to pushing the rate higher than November’s level of 1.2%.
Commenting on the figures, the Resolution Foundation think-tank said that it expected inflation to continue to rise this year, leading to a pay squeeze for workers.
Conor D’Arcy, a policy analyst at the organisation, said: “Today’s sharper than expected rise in inflation shows that the ultra-low price rises that consumers have benefitted from in recent years are well and truly over. Inflation has risen from 0.6% in July to 1.6% in December. That’s still low historically, but a significant rise to which wage growth has so far failed to respond.
“It will be years until we see the overall economic impact of Brexit, but the one dead cert in 2017 is rising inflation – fuelled by a sharp fall in the pound. With nominal pay only expected to rise by 2.4% in 2017, the risk is we see a fresh pay squeeze with rising prices eating up all pay growth by the end of the year.”
