UK inflation continued to increase in November to 2.6%, the latest data from the Office for National Statistics reveals.

The latest increase was driven by transport, housing and household service costs. Last month, inflation went up by 2.3%, where the increase was driven by higher household energy bills.

Last week, markets predicted inflation would increase to between 2.5% to 2.6%.

Deutsche Bank senior economist Sanjay Raja said he saw “more upward pressures percolating” in the UK economy other than stronger food and higher oil prices.

Commenting on today’s figures, MPowered Mortgages head of product Peter Stimson says: ““This is not the Christmas present the Bank of England wanted.”

“Inflation is surging deeper into warning territory and the Bank’s efforts to hold CPI at 2% are unravelling fast.”

The Bank’s rate-setting Monetary Policy Committee will set the base rate for the final time this year tomorrow (19 December).

In November, the Bank cut the base rate by 0.25% to 4.75%. This marks the second rate cut since August when it was lowered from 5.25% to 5%. Prior to that, the BoE made 14 consecutive rate increases.

Money markets are betting there is just an 8% chance of a rate cut tomorrow.

Stimson comments: “Optimists will cling to the idea that November’s surge in inflation was widely expected, and is partly the fault of a one-off jump in energy bills.”

“But no-one should expect the rising inflationary pressure to ease on its own. Core inflation, which strips out volatile factors like energy and food costs, continues to ratchet up and now stands at 3.5%.”

Meanwhile, L&C Mortgages associate director David Hollingworth says: “A rise in the rate of inflation was expected and the question was by how much the rate would diverge from the Bank’s 2% target.”

“Although it’s hard to view today’s figures as good news on the brighter side, the hike is in line with forecasts. That should help to avoid negative repercussions in mortgage rates that could have resulted from the added pressure of a higher-than-expected jump.”

“Any hopes for a further cut to base rate to come tomorrow look to have been dashed already by yesterday’s strong pay growth figures. That saw market rates edge up a little at the prospect of inflation remaining stickier than expected.”

“More positively, the fact that core inflation rate hasn’t risen by as much as predicted will help counter that.”

“Mortgage borrowers shouldn’t expect to see much change because of today’s figures. Further base rate cuts are expected next year but the Bank of England has played a consistent line that those reductions are more likely to be slow and steady in pace. The figures today do nothing to suggest that line is about to change.”

“Mortgage rates had edged higher in recent months after concerns over greater inflationary pressure being exerted by the measures announced in the Budget. Those increases have calmed as the market has found its level and an increasing number of lenders have been able to make some reductions to fixed deals.”

“This has helped to nibble away at fixed rates rather than slash them and I’d expect more stability in rates as we head into the festive period.”

Chetwood Bank chief executive officer adds: “This latest rise in inflation is a financial gut punch for Britons preparing for the year’s most expensive season.”

“It comes as no surprise following the uncertainty surrounding October’s budget announcement and could be a sign of a prolonged period of inflation above the government’s target. All eyes will now be on the Bank of England’s interest rate announcement on Thursday to see how they react to this news.”