- The impact of energy bill increases from supplier SSE will be offset by the effect of steeper utility bill rises in November last year
- But with further hikes from other providers coming into force, CPI inflation is predicted to peak at 3.5% by mid-2013
- Resurgent inflation will come as a blow to pensioners and savers, who have seen their income hit hard by rock bottom interest rates
More top news
The chancellor now faces the prospect of forming a minority government or calling for a snap election.
The 73-year-old said a return is unlikely "given the politicised atmosphere that seems to have afflicted our set."
Chancellor Philip Hammond said the UK will make a financial proposal to the EU in the next three-and-a-half weeks.