It is now just below the Bank of England’s (BoE) 2% target.
Rising fuel prices and to a lesser extent food prices were the main factors contributing to the increase in the Consumer Prices Index (CPI).
Inflation has been gradually rising, reaching 1.6% in December compared with a low of -0.1% in October 2015.
The BoE expects inflation to hit its 2% target in February and peak at 2.8% in the first half of 2018.
Tom Stevenson, investment director for Personal Investing at Fidelity International, said sterling weakness has continued to push fuel and food prices higher.
“With Britain seemingly heading for a hard Brexit, it’s likely we will see the pound continue to wobble over the next two years, resulting in higher inflation in the short term. Indeed, price rises are expected to reach 2.8% by the end of the year.
“With inflation forecast to exceed the Bank of England’s target this year, still slow wage growth and Mark Carney showing no intention of raising rates any time soon, millions of households will begin to feel the financial squeeze in their pockets. Rising prices and relatively stagnant incomes are a painful combination.”