According to ONS, the largest upward contributor to CPIH and CPI came from alcohol and tobacco, while the largest downward contributor consisted of food and non-alcoholic beverages.

Until December last year, inflation had steadily decreased over the past few months, which had been accompanied by consistent Bank of England (BoE) interest rates of 5.25% since August 2023.

While some experts may have been hoping for a fall in base rate at the next monetary policy committee (MPC) meeting on 1st February,  the latest inflation increase has cast some doubt as to whether the BoE will indeed take this step.

"Sticky inflation will only reaffirm to members of the BoE's monetary policy committee that they are right to hold the base rate at 5.25%, it may therefore delay slightly the point at which they start to cut the base rate,” said Paresh Raja, CEO at MFS.

However, Paresh does not think the latest inflation rise will drastically alter the BoE’s course when it comes to interest rates.

“The expectation remains that the bank will make cuts through the second half of the year, but the latest CPI print was a timely reminder that work is still to be done to get inflation under the BoE's 2% target,” he added.

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Other members of the bridging industry shared their views on what the latest upwards change in inflation may mean for the next MPC committee decision and the wider market.

Jonathan Samuels, CEO at Octane Capital, commented: “While an increase to 4% is not ideal it is only a 0.1 percentage point increase, driven by tobacco prices and airfares — other parts of the economy had lower inflation, like food importantly.

“Nevertheless, when taken together with the GDP growth for November 2023,  there is now less pressure on the bank to drop rates in February.

“That does not mean they won’t drop rates, but clearly the rationale is building to keep them at 5.25% [at the 1st February meeting] until the next MPC meeting [21st March].”

James Bloom, director at Alternative Bridging, also saw little need for alarm in terms of BoE base rates and still saw a generally positive trajectory in the overall market.

“The latest inflation figures were hopefully a blip — inflation does seem to be on a generally downward trend now, which means the BoE base rate can start to be slowly reduced.

“The positive news is it seems at least rates have stopped increasing and there is a rate war among some of the longer-term lenders, which are pricing in future rate cuts and scrambling to win the reduced mortgage business that’s being transacted.

“[However], until the BoE’s inflation target is met, we are unlikely to see much, if any of a rate cut.”