The Office for National Statistics (ONS) said CPI inflation climbed from 3.2% the previous month and remained above the government’s 2% target.
It represents a turn-around from the decline of 0.6% between April and September, when inflation fell to 3.1%.
The ONS said the increase was driven by a record rise in food, clothing and furniture prices,
Meanwhile, Retail Prices Index (RPI) inflation – which includes mortgage interest payments – rose to 4.7% from 4.5%.
Fidelity’s asset allocation director Trevor Greetham said tax was to blame for the elevated figures, which he expects will not concern the Bank of England.
“If you include VAT, inflation stands at 3.3%. If you strip out changes in indirect taxes, such as VAT, CPI is just 1.5%,” Greetham said.
“There is a game of smoke and mirrors going on in that every January VAT increases, so it looks like inflation is high, but actually it is government taxes going up; it is not domestically-generated wage inflation.”
Greetham added that quantitative easing is likely to continue in 2011.
He said: “House prices are falling again and we are a country where the housing market has a huge impact on spending and lending decisions.
“The Bank of England will run scared if property prices start falling significantly because housing is the collateral against which consumer debt is secured.”
