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14 December 2010
Last updated at 08:31 ET
The UK Consumer Prices Index (CPI) annual inflation rate rose to 3.3% in November, up from 3.2% in October.
It followed record price rises for the October to November period in food, clothing and furniture, the Office for National Statistics (ONS) said.
The Retail Prices Index - which includes mortgage interest payments - rose to 4.7% from 4.5%.
One Bank of England interest rate policymaker said he expected CPI to hit 4% next year due to the VAT rise.
Andrew Sentence, a member of the Monetary Policy Committee, also told the BBC that it was time for interest rates to increase gradually to try to dampen inflation.
He is the only member to have voted for a rate rise recently and said a lack of movement on rates when price rises had been above target for a year could be "a risk to the Bank's credibility".
Commenting on the inflation figures, BNP Paribas economist Alan Clarke, said: "It's a disappointing number and it's only going to get worse in the next couple of months."
Some of the major energy companies have begun to raise energy bills, adding to the squeeze on household finances.
"Next month is utility bills, the month after that is VAT. It's all one-way traffic at the moment," he said.
Record monthly changes Food and non-alcoholic drink prices were up by 1.6% between October and November, compared with a rise of 0.6% a year ago, the ONS said.
Clothing prices also rose by a record amount - of 2% - between the two months, with the biggest price rises found in men's outerwear.
This, in particular, surprised analysts, who had expected shops to be discounting clothes before Christmas.
Furniture, household equipment and maintenance also showed a record price rise of 1.6% between October and November.
Spending slowdown Some believe that the VAT rise from 17.5% to 20% will provide a screen that will allow retailers to put through more extensive price increases.
A report released on Tuesday by KPMG said that 60% of retailers and consumer product manufacturers planned to increase their prices over and above the VAT rise.
A British Retail Consortium spokesman, however, said the report was "nonsense".
The inflation rate has now remained above the 2% target by one percentage point or more for 12 months, and the Bank of England's governor, Mervyn King, has had to write four letters to the chancellor this year as a result.
But with the new government having announced the biggest round of budget cuts since World War II, the Bank still expects the resulting slowdown in spending to bring inflation down over the next two years.
However, as the BBC's chief economics correspondent Hugh Pym said, confidence in the Bank's predictions could wane if the New Year heralds more gloomy inflation news.
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It followed record price rises for the October to November period in food, clothing and furniture, the Office for National Statistics (ONS) said.
The Retail Prices Index - which includes mortgage interest payments - rose to 4.7% from 4.5%.
One Bank of England interest rate policymaker said he expected CPI to hit 4% next year due to the VAT rise.
Andrew Sentence, a member of the Monetary Policy Committee, also told the BBC that it was time for interest rates to increase gradually to try to dampen inflation.
He is the only member to have voted for a rate rise recently and said a lack of movement on rates when price rises had been above target for a year could be "a risk to the Bank's credibility".
Commenting on the inflation figures, BNP Paribas economist Alan Clarke, said: "It's a disappointing number and it's only going to get worse in the next couple of months."
Some of the major energy companies have begun to raise energy bills, adding to the squeeze on household finances.
"Next month is utility bills, the month after that is VAT. It's all one-way traffic at the moment," he said.
Record monthly changes Food and non-alcoholic drink prices were up by 1.6% between October and November, compared with a rise of 0.6% a year ago, the ONS said.
Clothing prices also rose by a record amount - of 2% - between the two months, with the biggest price rises found in men's outerwear.
This, in particular, surprised analysts, who had expected shops to be discounting clothes before Christmas.
Furniture, household equipment and maintenance also showed a record price rise of 1.6% between October and November.
Spending slowdown Some believe that the VAT rise from 17.5% to 20% will provide a screen that will allow retailers to put through more extensive price increases.
A report released on Tuesday by KPMG said that 60% of retailers and consumer product manufacturers planned to increase their prices over and above the VAT rise.
A British Retail Consortium spokesman, however, said the report was "nonsense".
The inflation rate has now remained above the 2% target by one percentage point or more for 12 months, and the Bank of England's governor, Mervyn King, has had to write four letters to the chancellor this year as a result.
But with the new government having announced the biggest round of budget cuts since World War II, the Bank still expects the resulting slowdown in spending to bring inflation down over the next two years.
However, as the BBC's chief economics correspondent Hugh Pym said, confidence in the Bank's predictions could wane if the New Year heralds more gloomy inflation news.
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