Image copyright Getty Images Image caption Signals are clear that rates will rise in spring
UK inflation hit a 10-year high of 2.9% in December, making a rate rise to 0.5% in the spring more likely.
The Office for National Statistics (ONS) said that the quarterly rate of consumer price inflation – broadly comparing the last three months of last year with the three months before – was also up by 0.1 percentage points to 1.2%.
Official figures last week also showed house prices rising at their fastest rate for a decade.
Economists say inflation shows a tightening of the labour market is tightening inflation.
“This isn’t the end of the road by any means but it does suggest the Bank of England will start to raise interest rates as early as the spring,” said Ruth Gregory, UK economist at Capital Economics.
Earlier this year, it was thought that prices would stay low because of falling output from Iran and Venezuela as a result of US sanctions.
But global demand for crude oil has continued to grow, sending prices sharply higher over the past few months.
The ONS said that energy prices rose by 3.1% on the year, the fastest annual rise since February 2013, up from 2.4% in October.
But this was partially offset by a fall in the price of petrol, which fell by 9.2% on the year.
“Higher fuel prices added 0.8 percentage points to the annual inflation rate in December and accounted for 65% of the monthly change, while the pound’s depreciation (falling by 2.1%) in December accounted for 27% of the annual change,” the ONS said.
Other types of goods have also risen in price over the past 12 months, including clothes and footwear, household appliances and music and books.
Official figures are coming later this week.
Expectations are high that the figures will show inflation accelerating to over 3% on the year.