Inflation is set to have accelerated at the start of this year because of rebounding airfares and sharp hikes in private school fees.
The rate of Consumer Prices Index (CPI) inflation is expected to have come in at 2.8%, according to a consensus of analysts, when the Office for National Statistics (ONS) releases fresh data on Wednesday.
It would represent a rise from 2.5% in December, when the rate surprisingly eased back.
Economists have said higher private school fees, driven by the Labour Government’s move to end the long-standing VAT exemption for private schools on January 1, will be a major cause of the rise.
From the start of this year, many schools passed price increases onto parents after the standard rate of 20% was applied to private school education and boarding fees.
Economists at Pantheon Macroeconomics has said however that private school fees are a “wild card” with limited information regarding schools’ price plans.
They said they are assuming a 14% month-on-month increase in primary and secondary school fees.
Airfares are also expected to swing higher for January because of seasonal price increases.
Both of these factors are expected to contribute to a jump in services inflation to above 5%, after it hit 4.4% in inflation.
Services inflation is among readings closely watched by the Bank of England as it considers interest rate policy in a bid to keep inflation down.
Inflation is expected to keep rising over the coming months, moving further away from the 2% target rate set by the Bank of England and the Government.
Earlier this month, the central bank said inflation is expected to keep rising to a peak of 3.7% in late summer.
It predicted the inflation rise as it also reduced its growth forecast for 2025, predicting that gross domestic product (GDP) will rise by 0.75%, half of its previous projection.
Tax hikes and wage increases linked to the Labour Government’s October Budget are expected to contribute to the acceleration in inflation later this year.
Pantheon predicted CPI inflation will hit 3.4% in April, as rises to business national insurance contributions come into force, alongside an increase national minimum wage.
