UK inflation increased to 3% in the year to January, the highest rate since March last year, the Office for National Statistics (ONS) has revealed.

This was up from consumer price index (CPI) inflation totalling 2.5% in December.

On a monthly basis, the ONS also revealed that CPI fell to 0.1%, having sat at 0.3% in December.

The figures come after the Bank of England reduced the base rate from 4.75% to 4.5% earlier this month. The Monetary Policy Committee (MPC) voted on a majority of seven to two to reduce the base rate, after there had been "sufficient progress on disinflation" in domestic prices and wages.

Reacting to the latest data, chief executive officer at Just Mortgages and Spicerhaart, John Phillips, said: "Following a surprise drop last month, inflation has surprised once again, coming in higher than many markets and analysts had expected. Alongside upward pressures on food and transport, a key factor was education as private schools became subject to VAT in January and passed this on in higher fees.

"We have to be realistic and acknowledge that inflation is likely to remain a persistent challenge this year, particularly with geopolitical tensions escalating, higher energy prices later in the year and as we see the full effects of government policy, such as the national insurance hike. We also have the elephant in the room and the upcoming Spring Statement at the end of March."

Chief sales and marketing officer at Phoebus, Richard Pike, added that while this "huge jump in inflation" was "expected given last month's unexpected drop", it raises questions around the economy’s current position.

He concluded: "It does create ongoing uncertainty and challenges within the UK economy, particularly in the financial services and mortgage markets. While the recent bank rate cut offers some relief to borrowers, rising inflation may temper expectations of further reductions in the near term.

"This slight uptick in inflation, with energy prices expected to rise in coming months, reinforces the need for lenders to remain agile, ensuring they can adapt to shifting affordability concerns and evolving borrower needs."

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