Inflation in the UK rose for the first time in five months to 3.4% in December, pushed up by higher air fares and tobacco prices.

The Office for National Statistics (ONS) said the annual inflation rate increased from 3.2% in November after falling in October and flatlining in the previous three months. The figure overshot City economists’s forecasts of a modest rise to 3.3%.

While analysts said the reversal of the downward trend was likely only to be temporary, City traders have now all but ruled out an interest rate cut by the Bank of England next month.

Part of the increase in inflation as measured by the consumer prices index (CPI) was driven by volatile items such as air fares, which rose by 28.6% in December.

Prices for flights always jump over the Christmas period but were compared with a particularly low level in 2024. Higher duties on tobacco products introduced by the chancellor, Rachel Reeves, in her autumn budget also came into effect in December.

Martin Beck, the chief economist at WPI Strategy, said: “December’s uptick in inflation should not set alarm bells ringing. The increase was largely driven by temporary and technical factors, not a broader resurgence in price pressures.”

The squeeze on the weekly grocery shop continued over the Christmas period, however, with annual food inflation rising again to 4.5%, from 4.2% in November. The ONS said the increase was particularly driven by a rise in the price of breads and cereals.

Core inflation, which strips out more volatile items such as energy and food, remained the same as in November, rising at an annual rate of 3.2% in December.

The bigger than forecast increase in CPI suggests the Bank of England’s monetary policy committee (MPC) will keep interest rates at 3.75% when it meets in February, with City traders not fully pricing in a cut until June.

However, many economists are forecasting a cut in April if price rises in the UK ease over the coming months alongside a softening in wage growth.

The Bank’s governor, Andrew Bailey, said last month he expected inflation to come back to about the MPC’s target of 2% by the middle of this year.

Services inflation, which is a measure closely watched by the Bank of England when deciding on interest rates but can be affected by more volatile categories such as air fares and hotel prices, rose to 4.5% from 4.4% in November, which was a smaller rise than economists had been expecting.

Yael Selfin, the chief economist at KPMG UK, said: “Despite services inflation increasing in December, this was not reflective of domestically generated price pressures and was largely driven by volatile categories, such as air fares.”

She said the Bank of England would probably look through December’s slight rise in inflation, “particularly with wage growth continuing to slow, which should see services inflation ease over the coming months”.

Reeves made tackling the cost of living a key component of November’s autumn budget, alongside introducing £26bn of tax increases to help repair the public finances and fund the lifting of the two-child benefit cap.

After Wednesday’s CPI figure she pledged that 2026 would be the “year that Britain turns a corner” on inflation.

“My number one focus is to cut the cost of living,” she said. “At the budget I announced £150 off energy bills, a freeze to rail fares for the first time in 30 years, a freeze to prescription charges for the second year running, and an increase to the national minimum and living wage.”

Separate data released by the ONS on Wednesday showed home rental prices rose at their slowest annual pace in more than three years last month. Average monthly private rents increased by 4% in the year to December, down from 4.4% in November and the lowest rise since May 2022.

Demand for lets has been falling in recent months, with 14% more homes available compared with a year ago, according to the property portal Zoopla. It said the shift was partly down to first-time buyers leaving the rental market because it was easier to get a mortgage thanks to improved borrowing conditions, higher wage growth and slower house price rises.