James Harness
Live reporter

We are ending our live coverage of today's surprise rise in inflation.

Earlier this morning we thought - based on analyst forecasts - the UK inflation rate was going to drop from 3.9% in November to 3.7% in December. At 07:00 GMT the Office for National Statistics published its numbers, revealing a small rise to 4%.

A small increase, but a shock to those who closely watch economic data. A closer look revealed the rise was stoked by an increase in alcohol and tobacco prices. Perhaps surprisingly, the cost of cat food played a part too.

Despite all this, economists are still forecasting a cut in the interest rate by the Bank of England by the middle of this year.

We will be covering PMQs on another page, here, where questions might be asked about the continuing rise in the cost of living.

• UK inflation rate calculator: How much are prices rising for you?

We're ending our live coverage soon, but before we go here's an at-a-glance look at this morning's economic news:

• The UK's inflation rate for the year to December rose to 4% - up by 0.1 percentage points on the previous month
• Economists had anticipated a fall in the annual rate of price rises to 3.7%
• This rate of inflation is still significantly down on the peak of October 2022, when it hit 11.1%, but still double the Bank of England's target of 2% a year
• The Office for National Statistics, who publishes the data, says the main cause of the unanticipated growth was increased tobacco prices due to higher taxes
• Other factors the ONS says contributed was the cost of alcohol, as well as the less-typical causes such as rises in prices for cat food and DVDs
• France, Germany and the US also saw similar rises in thier inflation
• Economists are still predicting UK interests rates will fall this year, with many anticipating the Bank of England will lower the cost of borrowing in Summer from its current rate of 5.25%
• Chancellor Jeremy Hunt says inflation does not fall in a linear manner, but argues the overall data shows the government's plan is working
• His Labour counterpart, Rachel Reeves, says the rise in prices is bad news for everyone and the country cannot afford five more years of "economic failure"

Image source, .

Faisal Islam
Economics editor in Davos

The bump in inflation in the UK should not come as a great surprise and could be repeated next month. Here at Davos, there are any number of reasons why global prices are proving sticky.

I’ve just spoken to Sven Holsether, chief executive of Yara International, one of the world’s biggest fertiliser producers. The food price shock is not over, he says, even as the key price index has fallen to pre-Russian war levels. Europe is even more dependent on Russia for wheat and fertiliser and reliant on flows of natural gas from the Gulf.

Apart from that, the markets have probably indulged in some wishful thinking on tumbling interest rates around the world and in the UK.

Interest rates could fall a bit this year, and inflation will fall again sharply from April when energy bills are cut. But the journey to that level will be bumpy. And even then, the Bank of England will be looking far more at underlying inflationary pressures than the headline rate.

Kevin Peachey
Cost of living correspondent

It is notable that - despite the slight rise in the inflation rate - lenders are still cutting their mortgage rates.

We have had announcements of reductions by Coventry Building Society and Santander this morning.

Clearly, that suggests a view that the direction of the Bank of England's benchmark rate will still be down, and relatively soon.

Competition in the mortgage sector continues.

Has the government still met its inflation pledge?published at 10:49 Greenwich Mean Time 17 January

10:49 GMT 17 January

Image source, .

Although the rate of inflation unexpectedly rose in December, the government has still comfortably met its pledge for inflation to halve in 2023.

The measure it was using was that the Consumer Prices Index (CPI) in the last three months of 2023 should be half what it was in the same period of 2022.

The figure for the last quarter (October – December) of 2022 was 10.7% and for the last quarter of 2023 it was 4.2%, so that’s been achieved.

It is not clear how much credit the government can take for inflation falling because prices were widely expected to fall anyway from the high levels in 2022, which were affected by rising energy prices due to the Ukraine war. Also, it is the Bank of England's responsibility to control inflation.

The prime minister is having more trouble with some of his other four priorities - you can read more about it here.

Hope Webb
News reporter

Image source, .

Mother-of-two Stacy Young is currently on statutory maternity pay of £172 a week, but says she needs to return to her job to increase her earnings.

Stacy, from Kirkcaldy in Fife, Scotland, gave birth to her youngest son Lewis six months ago and is eligible for nine months of paid maternity leave.

But she says she will need to go back to work almost three months earlier than she had planned because of the growing cost of baby essentials.

"I was hoping that the budgeting I'd done would allow me to stay off for the full nine months," she says.

She says that although she will have to pay for childcare the little bit of extra money she ends up with each week will make a big difference.

"I know for a fact when I drop him off, I'll be crying in the car on the way to work," she adds.

• You can read more on this story here.

There is a likelihood that inflation will rise in January because Ofgem's energy price cap increase has come into force.

It means the typical annual household annual bill would go up from £1,834 to £1,928.

But Cornwall Insight, a consultancy group, estimates that annual energy bills could fall by as much as £268 in April - when a new price cap comes into force - to £1,660.

Although, historically-speaking, that is still high.

Nevertheless, Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, says inflation should fall "at a decent pace" once these energy-related bumps have passed.

Kevin Peachey
Cost of living correspondent

On a busy day for the Office for National Statistics (ONS), it has published separate figures on the rising level of rent and falling house prices.

UK house prices were down 2.1% in the year to November, with the average price having fallen by £6,000 to £285,000. Those falls have accelerated compared with the previous month.

London is leading the price falls with an annual reduction of 6%.

Rent paid by tenants to private landlords rose by 6.2% in the year to December, the same figure as a month earlier.

Renters have faced particularly big increases for new tenancies, although analysts suggest these rises have now peaked.

Michelle Laithwaite, is the chief executive of Fuel Hub, a meal delivery service aimed at athletes.

She says the peak of food price rises saw costs from her suppliers go up around 20% in March 2023.

“What we tried to do last year was absorb the cost ourselves and not pass that on to our customers. The reasons for that were to obviously try and keep that really loyal customer base.. and to also to grow the subscribers,” she says.

She says they tried to keep costs down by constantly speaking to suppliers about the changing cost of vegetables, fish and meats.“It's just adapting our menu more regularly to make sure that we can offer the very best product but keep it within the price points that we’re set.”

She says she feels 2024 has got off to a better start in terms of food prices.

“They have come down some and I feel like they'll continue to come down. But what I see is that this will be the new norm. I don't ever think that things will go back to the way that they were two years ago. I think this is very much what I see as our new norm in terms of baseline prices.”

Is 'the average family set to be £1,200 worse off under Rishi Sunak’s tax plans'?published at 10:28 Greenwich Mean Time 17 January

10:28 GMT 17 January

That was the claim from Shadow Chancellor Rachel Reeves in response to this morning’s inflation news.

The combined effect of all the national insurance and income tax changes planned by the government between 2021 and 2028 is expected to increase the government’s tax take that year by £45bn, external, according to the UK’s government finances watchdog, the Office for Budget Responsibility.

That works out as £1,200 per household in the UK, if the bill is divided equally between all households.

But don’t worry if your family is living on an average income (about £35,000).

You won’t be losing that much.

As with all taxes, the bulk of the cost will be borne by families, external who earn a lot more than average, according to analysis by the Resolution Foundation.

See here for more on this claim.

While food price rises are easing, they are still relatively high, according to the ONS.

It says: "The overall price of food and non-alcoholic beverages rose by around 26% over the two years between December 2021 and December 2023.

"This compares with a rise of around 9% over the 10 years between December 2011 and December 2021."

One of the contributors to this is undoubtedly the war in Ukraine. The country is known as the "bread basket of Europe" because it grows grains, seeds and other crops needed for food, oil and animal feed.

The war means that supplies have been severely disrupted.

We've been reporting today that various factors can affect the cost of living, and the cost of business.

Stu MacDonald, founder of ManiLife Peanut Butter, says its biggest issue is the harvest, since the bulk of its cost is peanuts sourced from a single family in Argentina.

“The cost of peanuts this year has gone up 40%. Whatever can happen to wages, you can’t escape the impact of extreme weather on crops.”

Speaking to BBC 5 Live Breakfast, MacDonald says that they can cut costs out of the business, but since they are a small business that is still growing he doesn't want to lose existing customers.

“The role of a farmer is a pretty precarious one and hats off to anyone who’s farming any crop right now. The hope is it can’t get any worse, but we’ll see,” he adds.

Image source, PA Media

Yes they are, according to the ONS.

Petrol and diesel prices continued to fall in December.

The average price of petrol fell to 142.8p per litre, down from 155.3p in December 2023. Diesel prices dropped to 151.4p per litre compared to 179.1p in the year before.

Overall, motor fuel prices fell by 10.8% in the year to December.

For food and soft drinks, prices are easing rather than dropping - up 4.1% compared to a year ago. Milk, cheese and eggs are not as expensive as they were.

On the other hand, prices for bread, cakes and chocolate biscuits increased.

Lorraine Arnold, owner of Pier Point bar and restaurant in Torquay, southwest England, says that even though they bought the bar just three weeks before lockdown, they managed to get through Covid.

“Suddenly the last two years we’ve been slapped in the face one month after the other,” she tells BBC 5 Live Breakfast.

“If it’s not the potatoes it’s the fish, if it’s not the fish it’s the oil. If it’s not the oil it’s the wages. We want to pay our team a decent wage, however where is it coming from?” Arnold asks.

She says that the gap needs to be addressed by the government, insisting that the government "is doing nothing to encourage entrepreneurs”.

Arnold says that potato prices went up 50%, fish went up 25%, energy bills increased to over 30%. “All those costs you can’t pass on to your customer,” she adds.

“We’re little soldiers for Rishi. I voted Conservative for a long time, but I feel really let down. What really counts is what’s in my pocket, but there’s nothing in there.”

Kevin Peachey
Cost of living correspondent

Image source, PA Media

These figures do have some bearing on the amount you will pay for your mobile and broadband services.

Providers base their pricing on inflation and some use the December CPI figure - the one that is published today. Some use a different inflation figure - RPI - from a month later. They then add on a bit more.

It means customers could see mid-contract rises of up to 7.9% during the spring.

This issue has been controversial, with regulator Ofcom saying the way rises are communicated by providers is confusing.

BT said yesterday that it was changing the way it would operate - but not until the summer.

Dharshini David
Chief economics correspondent

The Red Sea shipping route is of vital importance to global commerce. But how much of a blow to prices could the current disruption cause?

Around 15% of trade travels through the area. But attacks by the Houthis on commercial ships in the region is adding at least 10 days and as much $1m (£790,000) in extra costs to divert.

Retailers like Next and IKEA warn of some delayed stock but the disruption would’ve been far greater had this happened during the Christmas rush.

An extra $1m is actually quite a very small proportion of the value of the cargo of a container ship – we ship things from thousands of miles away as it’s far cheaper.

Then there’s oil, a fifth used globally goes through the area. But despite a recent rise, the oil price remains below where it was last autumn.

Some have voiced concern over the potential disruption of liquid national gas from Qatar if the unrest spreads. But stocks in the UK and Europe are very high, wholesale prices are the lowest for months and the domestic energy price cap may fall by over 10% come April.

So the risk, particularly if the conflict escalates or is protracted, is worth watching but at present, it’s not sufficient to threaten to blow inflation off course.

Image source, .

As we mentioned earlier, inflation is the rate at which the cost of goods and services is rising. The Bank of England tries to limit this to 2%, but the figure has been well above that for some time.

Typically, central banks respond to inflation by raising interest rates.

Higher interest rates make it more expensive for people to borrow money to buy things, meaning they are instead encouraged to save their money. The theory is that they will then generally buy fewer things – reducing the demand for goods and services and therefore slowing inflation.

People who have already borrowed money and are repaying it with interest - such as those with mortgages - will be among the hardest hit by a rate rise, as their monthly payments will go up.

Despite today's unexpected rise in inflation most economists are still predicting a rate cut around June this year.

• Calculate how interest rates affect you here

Dearbail Jordan
Business reporter

Want someone to blame for higher inflation? How about cats?

According to the ONS, cat food contributed to the surprise increase in prices.

For some reason, it categorises feline grub under "recreational and cultural goods and services" and in the year to December, these prices rose by 6%. This was an increase from 5.5% in November.

Given it was, for many, the Christmas season, prices for computer games, consoles and toys rose. As did DVDs which, in this age of streaming, is perhaps a surprise.

Meanwhile, prices for theatre tickets - Christmas pantomimes? - also increased as did the cost of package holidays.

The ONS cautions that "short-term movements in some of these categories should be interpreted with a degree of caution as the movements depend upon the composition of best seller charts".

Though we'd love to know what people are feeding their cats.

Image source, Getty Images

Clodagh Rice
BBC News NI business correspondent

I've been to the Kennedy Centre in west Belfast to find out how much people in Northern Ireland are feeling the squeeze in their cost of living.

Rising costs are hitting business owners there, including hairdresser Carol White who said customers were increasing the length of time between visits.

The cost of running her business has risen at the same time, with her electricity bill up by 50%.

"Covid had a massive impact on hairdressers being closed for so long, it has taken a long time to recover, this year is the first time we are back to pre Covid levels," she tells me.

For butcher John Adams last year was his shop's strongest Christmas to date, but he says he has noticed people cutting back and shopping differently.

"We open up a Christmas club in September so it's easier for customers to save up each week as they come in. January is definitely quieter," he tells BBC News NI.

"Footfall in the centre is good but you can tell it's a slow month for a lot of people."

Adams says customers are still coming in, but are buying less and choosing cheaper cuts of meat over more expensive items like steak.

"They're deciding to change their dinners for stews because you can buy more of the product that's cheaper, definitely for the bigger families."

• Read more here

Both the Office for National Statistics (ONS) and the government have said the surprise rise in UK inflation follows global trends, highlighting the situation in France, Germany and the US.

Here's a quick look at the Consumer Price Inflation figures of December in each of those places:

• The White House says, external US CPI rose by 0.3 percentage points from November, up to 3.4% overall
• France has reported a rise of 0.1 percentage points, external for its December figures, with an overall CPI rate of 3.7%
• In Germany, the CPI measure for December is 3.7%, external - up 0.1 points on the previous month as well

An important note, while the overall measure is the same - how inflation is calculated precisely varies by country-to-country, so the numbers are not 100% comparable.