The rate of Consumer Price Index inflation rose to 10.1% in September from 9.9% in August, the Office for National Statistics has said.
Economists predicted that it would show the CPI inflation increased to 10% in September, compared with 9.9% the previous month.
The increase comes despite a drop in petrol prices.
Petrol prices dropped by around 4% over the month according to Forex.com, as did used car prices.
Experts at Pantheon Macroeconomics have said this is expected to have been offset by “further increase in food CPI inflation and services”.
Food inflation increased
Food inflation is predicted to have jumped to 14.3% from 13.1% in August.
The inflation reading for September will be important for the Treasury as it will use it to decide increases for a number of key policies.
For example, the CPI rate will be used as part of the Work and Pensions Secretary’s annual benefits uprating review.
If the Government decides to uprate benefits by inflation, this is the percentage they will be increased by, this will come into effect from next April.
September’s inflation figure is also the one used by the department within the triple-lock pension commitment.
The triple-lock means pensions will rise by the highest of three figures: average earnings, CPI inflation based on September’s rate or 2.5%.
With average earnings most recently hitting 5.4%, it is widely expected that pensions would rise by the inflation rate in April next year.
However, on Tuesday, Downing Street indicated ministers could ditch their commitment to the triple lock as new Chancellor Jeremy Hunt looks for more cuts to fill the Government’s financial black hole.
The inflation rate will also be used to decide the property tax increase facing high-street firms.
Business rates for firms will increase by almost £2.7 billion in England from April without Government intervention if inflation hits the predicted 10% figure.
What is inflation?
In finance, inflation refers to a general increase in prices and a fall in the purchasing value of money.
When the general price of items rises during inflation but the value of money stays the same, consumers can buy fewer items and goods for the same monetary sum.
Therefore, higher inflation would mean people’s money would have less and less purchasing power.
As a result, savers may suffer and households may find it harder to stay within their budgets.