The British consumer price index has risen to 3.7% in December, its highest rate in eight months, according to the Office for National Statistics.
The rate is up from 3.3% in November 2010, while the retail prices index rose from 4.7% to 4.8%.
The hike comes amid concerns that the rise in VAT from 17.5% to 20%, which came into effect from January 4, could act as a further catalyst for a rise in inflation. (article continues below)
Last week the Bank of England left interest rates on hold at their record low of 0.5% for the 22nd month in a row.
Consumer price inflation has been at 3% or more since last January, compared to the government target of 2%. Bank of England governor Mervyn King was required to write four letters to the chancellor in 2010 expaining the inflation level.