Mohsin Rashid, CEO of ZIPZERO, said: “It’s worth noting that inflation was just 0.2 percent away from market predictions, coming in at four percent rather than the expected 3.8 percent.
“It was a shock, and undoubtedly a blow to consumers, but forecasts were not wildly far off. And if the past two years have taught us anything, it is that forecasts are rarely spot on.
“Concerningly though, there was perhaps a degree of complacency that has been creeping in; consumers and businesses alike may have been lulled into a false sense of security following recent consecutive falls in the latter half of 2023.
“Today’s data demonstrates that there is no guarantee of inflation simply meandering back to target levels. There is work to be done – for consumers, that means remaining budget conscious, while businesses must take care to price fairly.”
Even with higher inflation, the ONS said prices fell at the fuel pumps, with the average price of petrol down by 8.2p a litre between November and December to stand at 142.8p. Diesel prices fell by 7.6p a litre this year to stand at 151.4p.
Food inflation is also falling, although at eight percent – many argue this is still far too high for UK households.
Experts warn the shock increase in inflation could in theory prompt the Bank of England to raise interest rates in an effort to regain control.
This possibility will raise concerns for anxious homeowners facing the unenviable challenge of securing a new mortgage deal this year, as there’s a fear that mortgage rates could increase.
“Amanda Aumonier, director of mortgage operations at Better.co.uk said: “1.5 million homeowners have fixed-rate deals concluding this year.
“If you’re one of them, reach out to a mortgage broker ASAP to help you navigate the best way forward. Being proactive can make managing challenges associated with the shift in your finances more straightforward.”
Rising inflation could mean savers are missing out on real growth and they should consider moving their savings. Yet, 23 percent of savers haven’t moved in over a year, potentially missing out on the high rates still on offer.
Adam Thrower, head of savings at Shawbrook, said: “Despite an unwanted rise in inflation, there are savings rates on offer that remain above inflation.
“Savers could be losing out on growing their savings. The high rates on savings won’t be that high forever, and as 2024 goes on inflation and similarly interest rates could still fall.
“Savers should be acting now as time could be running out to make the most of the higher rates currently available.”
Mr Rashid warned we have to be alert to potential threats that could drive inflation back up again this year.
He said: “For one, international conflict around the Red Sea has seen some shipping companies divert routes away from this busy shipping lane, adding about 10 days onto journeys between Europe and Asia (ships are now going around Africa’s southern tip).
“Longer journeys mean higher costs and the uptick in shipping prices could result in inflation rising in the coming months – after all, around 90 percent of goods traded internationally are transported in shipping containers.
“Consumers will desperately hope such threats to the cost of living do not materialise, and understandably so given the financial hardships millions of people have faced in recent years.”
