Transport costs, particularly air fares, and to a lesser extent motor fuels, were the main contributors to the rise, said the ONS.
These were partly offset by downward pressure on prices for alcohol and tobacco along with food and non-alcoholic beverages.
Monthly inflation has been between -0.1% and 0.1% for the past eleven months, helped by plunging commodity prices.
But house price inflation, which is not in the CPI index, continues to run far ahead of general inflation. The ONS said UK house prices increased by 7.7% in the year to November 2015, up from 7.0% in the year to October 2015. The biggest rises were in the east of England.
Measured by the retail prices index, which is still used to set some train ticket prices and pension payments, and is calculated to include housing costs, inflation was 1.2% in the year ending December 2015, up from from 1.1% in November 2015.
Last week, the Bank of England left interest rates unchanged at 0.5%, with expectations growing that there will be no rise in base rate throughout 2016. Analysts expect inflation to remain well below the Bank of England’s 2% target for the rest of the year.
ONS head of CPI James Tucker said: “Today’s small rise in CPI was mainly down to air fares and motor fuels, partially offset by falls in alcohol and food prices.”
“While this modest rise takes CPI to its highest level for 11 months, it is still at historically low levels.”
Sterling, which has fallen steeply in recent weeks against the euro and the dollar as expectations of rate rise have receded, rebounded following the release of the data. This morning it was up 0.6% against the euro to 1.315 and up 0.5% against the dollar to 1.432.
Producer price inflation, which measures the price of goods bought and sold by UK manufactuers, continued to fall in the year to December 2015. The ONS said factory gate inflation fell by 1.2% in December, although this was slightly less than the November figure of 1.5%.
Manufacturers have benefitted hugely from the fall in commodity prices, with the overall cost of ‘input’s down 10.8% in the year to December 2015.
Maike Currie, investment director, Fidelity International said: “Today’s figures show UK prices increased incrementally to 0.2% in December, and while this is the first month since January 2015 that the rate exceeded 0.1%, the trend of near-zero inflation is expected to continue as a slowdown in the emerging world and the global manufacturing sector puts a dampener on demand.
“Persistently weak inflation means there is little incentive for the Bank of England to raise interest rates. Those wanting an early rise may point out that the big falls in food and petrol prices in early 2015 will soon drop out of the inflation numbers in coming months.
“However, as these temporary pressures wane, the key drivers determining the future path of inflation will increasingly be domestic costs, specifically labour costs. In this light, markets will no doubt keep a close eye on tomorrow’s employment numbers. Bank of England governor Mark Carney has said he wants to see annual wage growth of about 3%, among other factors, before the time is right for the Bank of England to move on rates.”
This article was written by Patrick Collinson, for theguardian.com on Tuesday 19th January 2016 09.42 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010