Households face finance freeze as inflation hits six-year high

● Inflation at highest level since 2012 ● Pressure piled on Bank of England

Inflation unexpectedly jumped to a near six-year high last month, forcing the Bank of England to explain to the Chancellor how it will tackle Britain’s surging cost of living.

Figures from the Office for National Statistics (ONS) show the Consumer Prices Index (CPI) rose to 3.1 per cent in November, up from 3 per cent in October.

It means inflation has climbed to its highest level since March 2012, with economists expecting CPI to hold steady for the third month in a row at 3 per cent.

The outcome spells more misery for households as they face a further squeeze on their finances ahead of the Christmas period.

It also means Bank Governor Mark Carney must pen a letter to Chancellor Philip Hammond – due to be published in February – outlining the reason behind CPI’S rapid rise.

The government has set a CPI target of 2 per cent, with protocol dictating the Bank must contact Mr Hammond if inflation exceeds 3 per cent or falls short of 1 per cent.

The move will pose fresh questions to the Bank’s interest rate-setting Monetary Policy Committee (MPC) about whether or not inflation has topped out.

Lucy O’carroll, Aberdeen Standard Investments chief economist, said: “It’s quite possible that inflation is now close to its peak.

“But some of the latest surveys suggest that service sector costs and prices are rising. Given how dominant services are in the economy, this could feed through to inflation overall.

“That means that further interest rate rises are definitely not off the table. The Bank of England has a tricky tightrope to walk. Too much inflation could threaten the Bank’s credibility and therefore its grip on the economy.”

The MPC is expected to keep interest rates on hold when it announces its latest decision tomorrow, after hiking the cost of borrowing to 0.5 per cent last month.

The lion’s share of the rise came from air fares, which recorded a smaller monthly drop in November at 10.4 per cent, compared with a 13.4 per cent fall over the period last year.

Computer games prices were also boosting everyday costs, as games, toys and hobbies lifted 3.7 per cent on an annual basis last month.

Food and non-alcoholic drinks prices pushed higher, picking up by 0.6 per cent month on month.

Motorists were also facing higher fuel costs in November, with petrol up by 1.8p per litre month on month to 119.1p. Diesel also rose by 2.3p a litre to 122.8p.