The record monthly movement was mainly due to the increase in January in VAT to 17.5% from 15% and the continued increase in oil prices.

The 3.5% figure is also the highest CPI annual inflation for over a year since November 2008 when it stood at 4.1%.

The increase in the VAT rate also meant Retail Price Index (RPI) annual inflation increased in January. It was the highest Retail Price Index (RPI) monthly movement from a December to January period for over 10 years.

The largest upward contribution to the change in RPI annual inflation between December and January came from housing.

In housing the largest upward effect to the change came from mortgage interest payments which rose this year but fell significantly a year ago when most lenders passed on at least part of the one point decrease when the Bank rate fell from 3% to 2%.

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The RPI was flat between December and January this year, which is the strongest growth for a December to January period since 1997 (when it was also flat).

The last time the RPI had positive growth between a December and January was in 1991 when there was an increase of 0.2%.

The increase of 1.3% in the RPI annual inflation rate to 3.7% in January from 2.4% in December and follows a 2.1% increase in the annual rate between November and December.

Bank of England Governor Mervyn King will now have to write a letter to the Chancellor explaining the increase.

A new change to the measurement of Mortgage Interest Payments within the RPI which will include mortgage interest payments will published from March.