The higher-than-expected jump to 3% from 2.5% in December, means prices rose at the fastest pace for 10 months.

Food staples such as meat, eggs, butter and cereals were all more expensive than a year ago and comes as many households prepare for higher energy and water bills later this year.

Following the latest figures, the government warned that the road back to low inflation would be “bumpy”, but the Conservatives and Liberal Democrats argued Labour’s tax rises and spending plans had caused the latest spike.

Rising food prices last month mean, on average, the cost of buying groceries is 3.3% more expensive than it was a year ago.

While many staples have edged up in price, some items such as olive oil and lamb have increased markedly, by 17% and 16% respectively.

The rise in inflation, which is a measure used to give a general picture of how living costs have changed over a year, comes ahead of predicted increases to energy bills in April.

Water and council tax bills are also slated to rise in two months’ time, which will push up the cost of living for households.

The government has raised the minimum wage for all age groups from April. Benefits and the state pension will also increase.

But some businesses have warned that higher pay, as well as a rise in National Insurance, will mean increased prices for customers as companies attempt to cover increased costs.

“Life is a struggle,” said Gaby Cowley. The young mum told the BBC that she could already “barely make both ends meet” but food prices are now “ridiculous” – something that keeps her up at night.

“Food shopping has almost doubled from about three years ago,” she said. “We spend, maybe, a minimum of £90 a month now and that doesn’t include £20-£30 topping up during the week with fruit, veg and milk.”

If there is more money going out than coming in, Ms Cowley said she will sell her baby’s old clothes “just to make a little bit of money to do things”.

She hopes the rise in minimum wage will see her pay go up, although she thinks the struggle is far from over.

As well as food, inflation was fuelled last month by plane tickets. Air fares tend to rise into December and fall into January, but the drop was less than in previous years, according to the Office for National Statistics (ONS).

It also said that private school fees grew by about 13% at the beginning of the year due to VAT being added from 1 January after the government removed the tax exemption.

The sharper rise in inflation – it had been expected to climb to 2.8% – has also led to speculation over how the Bank of England will react in terms of interest rates.

High inflation in recent years, peaking at 11.1% in October 2022, saw the bank raise interest rates, which pushed up the cost of loans, credit cards and mortgages.

As price rises have eased, borrowing costs have fallen and the Bank decided to cut rates earlier this month to 4.5%.

But with the rate remaining above the Bank’s 2% target, some economists suggest further cuts could be made at a slower pace.

Professor Jonathan Haskel, a former member of the Bank of England’s interest rate-setting committee, told the BBC that policymakers could “take no signal” from the inflation spike and carry on cutting rates gradually or view it as a “harbinger of more to come” and change course.

Grant Fitzner, chief economist at the ONS, said because the VAT charge on private schools came into effect last month, the impact on inflation was a “one-off”.

But Sarah Coles, head of personal finance at Hargreaves Lansdown, said the threat of higher wage bills for supermarkets and producers meant there was “every chance” food price rises in January would not be the last.

“This is on top of rises in everything from water bills and council tax – which is why it has become known as Awful April,” she said.

James Murray, exchequer secretary to the Treasury, admitted that getting inflation back down to the 2% target would be “bumpy”.

“We are in a different world than we were a few years ago under the previous government, where inflation was routinely double digits,” he said.

“The Bank of England has been clear that they expected inflation to be slightly higher in the first half of this year….but we’re confident in our plan for change to make sure that we’re kick-starting economic growth by making the reforms that are necessary to boost economic growth right across the country,” he added.

But shadow chancellor Mel Stride said Labour’s “tax hikes and inflation-busting pay rises” were to blame for the scale of January’s rise.

Liberal Democrat Leader Ed Davey added: “The chancellor’s misguided policies are putting us at risk of a new era of stagflation. The economy still isn’t growing, and now people are being hit in their pockets too.”

Ruth Gregory, deputy chief UK economist at Capital Economics, said January’s figure would be “uncomfortable” for the Bank of England, but said she doubted it would prevent further rate cuts.

“The risk is that the rise in inflation proves more persistent and rates are cut more slowly than we expect, or not as far,” she added.

On average, prices in December were up 2.9% compared with a year earlier, up from 2.7% in November, the Labor Department said.

Energy prices accounted for more than 40% of the rise in inflation last month, according to the monthly report. It also showed egg prices shot up more than 36% compared with 2023, as a bout of bird flu hit supply and led to shortages.

But prices for other items rose by less than expected over the month, calming market fears that the US central bank might have to act more aggressively to stabilise prices.

So-called core inflation – which strips out often bumpy food and energy prices – was up just 3.2% from December 2023 and just 0.2% from November, rising less than analysts had expected.

Economists say that metric is a better indicator of underlying trends.

Share prices in the US surged and bond yields – interest rates on US government debt – fell in early trading on Wednesday in New York, reflecting market relief.

Seema Shah, chief global strategist at Principal Asset Management, said the latest figures should relieve “some of the anxiety that the US is at the beginning stages of a second inflation wave”.

“Perhaps the key takeaway is that markets are likely to be whipsawed over the next few data releases as investors seek a narrative that they can be comfortable with for more than just a few days at a time,” she said.

Inflation, the rate of price increases, has come down significantly in the US since 2022, when it shot past 9%.

Investors had expected the Federal Reserve, which had hiked rates to the highest levels in more than two decades to fight the problem, to cut rates this year as a result.

But the Fed is less likely to cut interest rates if the economy is growing. As such, last month’s stronger-than-expected job creation figures raised doubts about how much US interest rates might fall in the months ahead.

Investors are also nervous that plans by President-elect Donald Trump for tariffs, mass migrant deportations, and tax cuts could put upward pressure on prices. If this did drive inflation, it too would make Fed rate cuts less likely.

Last month, the data showed prices ticked up for many items, including used cars, airline fares, medical care and car insurance.

Grocery prices climbed 0.3% over the month and were up 1.8% from a year ago.

Rents and other housing prices – which have been among the biggest drivers of inflation – rose 0.3% from November, the same pace as in the prior month. They were up 4.6% compared with December 2023.

Petrol prices rose 4.4% from November, but remained lower than a year ago.

The Fed is widely expected to keep its key rate, which now stands at about 4.3%, unchanged at its meeting this month.

Tina Adatia, head of fixed income for client portfolio management at Goldman Sachs Asset Management, said inflation would have to cool more for the Fed to cut further but that today’s data would keep those hopes alive.

“While today’s release is likely insufficient to put a January rate cut back on the table, it strengthens the case that the Fed’s cutting cycle has not yet run its course,” she said.

Fuel and clothing were among the main drivers behind the rise. Increasing ticket prices for gigs and plays were also a factor.

Analysts say the latest figures mean the Bank of England will almost certainly not cut interest rates when it meets on Thursday.

Inflation rose again this month as prices of motor fuel and clothing increased this year but fell a year ago,” said Grant Fitzner, chief economist at the Office for National Statistics (ONS), which gathered the data.

“This was partially offset by air fares, which traditionally dip at this time of year, but saw their largest drop in November since records began at the start of the century.

“Chancellor Rachel Reeves said she recognised that families were still struggling with the cost of living.

“Today’s figures are a reminder that for too long the economy has not worked for working people.”

“I am fighting to put more money in the pockets of working people.”

Inflation, while higher than earlier in the year, is well below its peak in late 2022.

It has fallen steadily over the past two years and undershot the Bank of England’s 2% target in September, before rising again in October.

The official forecasting body said in October that inflation was likely to pick up to 2.6% in 2025 in part due to the impact of Budget measures announced in October.

Shadow chancellor Mel Stride said: “The chancellor has made a series of irresponsible and inflationary decisions.

“These figures mean higher costs in the shops, less money in working people’s pockets and risks keeping mortgage rates higher for longer.”

Prices for food and non-alcoholic drinks, alcohol and tobacco, and footwear all rose at a faster pace last month.

A wider measure of inflation showed housing and household services costs, including rent, rose by 3.5% over the past year.

Sarah Coles, head of personal finance at the financial services firm Hargreaves Lansdown, said: “Inflation is staying put for now, like an unwelcome Christmas party guest hogging the sofa into the small hours.

“The question is whether it can be shifted, or if it’s going to hang around to ruin our plans for months – eating us out of house and home and driving up the cost of everything again.”

The Bank of England will have to weigh up competing arguments over whether to cut interest rates.

Recent figures show the economy shrank in September and October, and the usual response would be to lower interest rates.

That would ease the pressure on mortgage-holders and other borrowers, including businesses and should boost spending and investment.

However, rising prices, combined with figures on Tuesday that showed faster growth in wages, suggest rates may need to remain at their current 4.75% for longer, to keep inflation in check.

Many economists now expect interest rates to fall more slowly next year than had been expected previously.

Paul Dales, chief UK economist at the think tank Capital Economics, said November’s higher inflation figure made it very unlikely interest rates would be cut on Thursday.

“There is almost no chance of the Bank of England delivering an early Christmas present with another interest rate cut tomorrow, ” he said.

“That’s especially the case since domestic inflation pressures appear to be a touch stronger than the Bank expected.”

Capital Economics predicts inflation will dip in December and then rise again in January, but by the end of next year would have fallen back to close to the Bank of England’s 2% target.