British core factory gate inflation picked up last month on higher scrap metal prices, and raw material costs also rose more than expected.
The Office for National Statistics said today output prices excluding food, drink, tobacco and petroleum rose 0.5 per cent on the month, the biggest gain since April last year and more than double the consensus forecast.
That took the annual rate up to 2.7 per cent, the strongest since June, adding to expectations the Bank of England may have to raise interest rates further to rein in inflation.
Sterling rose against the dollar as the figures provoked fears that price pressures are again feeding through the supply chain even though the cost of energy has fallen from last year's record highs.
The Bank of England has raised rates three times since August to 5.25 per cent in an effort to cool above-target inflation, and many analysts expect the central bank to raise rates once more this year.
Consumer price inflation has eased to 2.7 per cent in January from 3 per cent in December and is expected to fall, perhaps sharply, to around or below its 2 per cent target later in the year.