A record monthly jump in prices drove British inflation to an eight-month high in December, piling pressure on the Bank of England to raise interest rates and show it is not letting inflation get out of control.
The Office for National Statistics said the annual rate of consumer price inflation rose to 3.7% last month from 3.3% in November - much higher than analysts' forecasts for a steady reading. Prices rose a record 1% between November and December.
Inflation has been at least a percentage point above the BoE's 2% target throughout 2010, and rising inflation expectations among the general public and bond investors have caused markets to price in a first rate hike by mid-year.
Inflation is likely to climb yet higher in January, as an increase in VAT to 20% from 17.5% takes effect.
The Bank of England forecast in November that inflation would average around 3.2% in the fourth quarter of 2010. More recently policymakers have said it could hit 4% early in 2011, due to January's VAT rise.
The ONS said the biggest drivers of inflation last month were air transport, fuel, utility and food bills. Fuel costs rose at their fastest annual rate since July, and food prices showed their biggest annual rise since May 2009. Oil prices are fast approaching $100 a barrel, far higher than the Bank of England assumed in November.
But policymakers argue that the factors driving prices at the moment are temporary, and that raising interest rates in response risks derailing a fragile economic recovery.
The Bank of England had an estimate of today's data when it made its decision to leave interest rates at their record low 0.5% last week.
