CPI inflation has spiked upwards for the second month in a row, to 2.6% in November, ONS reported today.

Higher prices for fuel and clothing were the main factors but rising housing costs were also a major factor.

CPI inflation is now considerably above the Bank of England’s 2% target. The Bank is due to announce its next review of the base rate, currently 4.75%, tomorrow.

The rise deals a blow to the Government’s hopes of keeping a long term lid on inflation.

Chancellor Rachel Reeves said in a statement today: "I know families are still struggling with the cost of living and today’s figures are a reminder that for too long the economy has not worked for working people. I am fighting to put more money in the pockets of working people. That’s why at the Budget we protected their payslips with no rise in their national insurance, income tax or VAT, boosted the national living wage by £1,400 and froze fuel duty. 

"Since we arrived real wages have grown at their fastest in three years. That’s an extra £20 a week after inflation. But I know there is more to do. I want working people to be better off which is what our Plan for Change will deliver.”

The wider Consumer Prices Index, including owner occupiers' housing costs (CPIH), increased by 3.5% in the 12 months to November, up from 3.2% in the 12 months to October and on a monthly basis, rose by 0.2% in November, compared with a fall of 0.1% in November 2023.

The Consumer Prices Index (CPI) rose by 2.6% in the 12 months to November, up from 2.3% in the 12 months to October. On a monthly basis, CPI rose by 0.1% in November, compared with a fall of 0.2% a year earlier.

Apart from rising fuel costs and clothing costs, ONS said there was a further large upward effect in CPIH from rising housing and household services.

Core CPIH (excluding energy, food, alcohol and tobacco) rose by 4.4% in the 12 months to November 2024, up from 4.1% in October; the CPIH goods annual rate rose from negative 0.3% to positive 0.4%, while the CPIH services annual rate rose from 5.6% to 5.7%.

Core CPI (excluding energy, food, alcohol and tobacco) rose by 3.5% in the 12 months to November 2024, up from 3.3% in October; the CPI goods annual rate rose from negative 0.3% to positive 0.4%, while the CPI services annual rate was unchanged at 5.0%.

Danni Hewson, AJ Bell head of financial analysis, said there may be consumer concern about the rise in prices.

She said: "Households really won’t care that at 2.6% inflation is significantly lower than that the levels we all experienced at the height of the cost-of-living crisis, all they’ll really care about is that prices are still rising faster than any of us would like.

“Whilst prices do naturally rise and fall, meaning the increases in fuel and clothing costs aren’t really cause for specific concern, it’s the stickiness of service sector inflation that will be drawing the attention of Bank of England rate setters who are about to make their last decision of 2024."

Daniel Casali, chief investment strategist at wealth management firm Evelyn Partners, said: “With this reading, CPI inflation is currently running slightly ahead of the 2.4% BoE forecast for the fourth quarter of 2024. In the data, services CPI inflation remains elevated at 5.0% year-over-year. Within services, there are still pockets of inflation, like rents in the housing category, which are running north of 7% per year.

“Stubborn inflation may lead the BoE into a more modest rate-cutting cycle. So, it looks like it will skip the opportunity to cut interest rates tomorrow and it’s probable that the next BoE interest rate cuts will come at the 6 February and 8 May BoE meetings.”

Sarah Pennells, consumer finance specialist at Royal London, said: “Although today’s rise in inflation was expected, any increase is not the news consumers will have been hoping for. Inflation isn’t rising at the rates we saw in 2022 and 2023, but the three plus years of higher prices and bills is taking its toll on consumers’ finances.

“Our cost of living research shows that rebuilding financial resilience is taking time, with almost one in ten UK adults saying they couldn’t afford an unexpected bill of any size from their income or savings and one in five saying they could only afford an unexpected bill of up to £250. Christmas is the most expensive time of year for many households, and the start of the year sees higher bills – from credit cards to energy.

“Our research also shows that over eight in ten UK adults are worried about rises in the cost of energy and food, and one in five are regularly overdrawn at the end of the month or have to dip into the red from time to time. Rising inflation will make it even harder for those already finding it a challenge to afford the essentials and to get their finances back on track.”

• This is a developing story. Check back later for reaction and analysis.