Rising transport costs, along with increases in the price of clothing and recreation items, fuelled the increase although the rate remains historically low and well below the Government's 2% target.
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 0.8% in December 2020, up from 0.6% in November.
ONS said that rising transport costs such as petrol increases added 0.11 percentage points to the monthly change, while increasing prices for clothing, recreation and culture items contributed 0.10 percentage points.
These rises were partially offset by a downward trend in food and non-alcoholic beverage prices.
On a monthly basis, CPIH grew by 0.2% in December, following a 0.1% fall in November.
ONS said as Coronavirus restrictions eased in some areas in December (before the latest lockdown) the number of CPIH items identified as unavailable was nine, accounting for 2% of the basket by weight. This number has fallen from 72 in November.
The CPI rate grew by 0.3% in December after a 0.1% fall in November.
AJ Bell said it was hard to discern a pattern in inflation but rates were likely to remain low for some time.
Laith Khalaf, financial analyst at AJ Bell, said markets were now pricing in a 40% chance of a rate cut this year.
He said: “There’s not much in the way of a pattern to discern in the latest inflation data, which is perhaps not surprising given the huge disruption to consumer behaviour caused by the pandemic.
“It’s prudent not to draw too many conclusions from consumer price measures right now, because levels of economic activity are so deeply distorted. While inflation looks well contained, there is increasing concern it could start to be a problem once social restrictions are lifted, as a wave of pent up consumer demand is unleashed.”
“If inflation does take hold, the Bank of England has plenty of ammunition to throw at the problem by raising interest rates from historic lows.”