The consumer price index (CPI) is expected to have risen by an annual rate of 3.1 per cent in October when figures from the Office for National Statistics are released tomorrow.
Economists expect inflation to peak at 3.1 per cent in October, up from three per cent in September, the highest level in more than five years.
With wage growth figures due Wednesday expected to have slowed to 2.1 per cent in September, higher inflation would add to the increasing squeeze on households.
The Bank of England expects CPI to peak at 3.2 percent in October, before falling to 2.4 per cent by the end of 2018, according to its inflation report.
Ian Williams, an economics and strategy analyst at Peel Hunt, said October could mark “the peak in headline CPI inflation” with the rate potentially climbing further above 3 per cent year-on-year, before “falling back as the exchange rate comparatives become more helpful.”
“Survey evidence continues to suggest labour market tightness is building, but it remains slow to appear in headline average earnings,” he added.
Any figure higher than three per cent means Governor Mark Carney will be forced to send a letter to the Chancellor of the Exchequer Philip Hammond explaining why inflation has moved away from the two per cent target and the Bank’s plan to bring it back in line with this goal.
The mass of economic data released this week will paint a clearer picture of the UK economy ahead of next week’s budget, with wage growth data due Wednesday and retail sales figures released on Thursday.