Inflation has already hit a 31-month high, but economists are almost universally predicted a steep rise in consumer prices over the coming year.
The Bank of England (BoE) expects consumer prices to rise to 2.7 per cent by the end of this year, but other economists think that might be at the more conservative end of predictions.
Here are the reactions from economists and analysts.
Adam Chester, head of economics at Lloyds Bank Commercial Banking, said: “Rising food and energy prices, and the broader impact of the pound’s fall on UK import prices, look set to push headline inflation above the Bank of England’s two per cent target next month, with further increases to around three per cent expected by the end of the year.
While the Bank of England (BoE) has signalled it is prepared to look through higher inflation, “there is a risk that the rise in inflation could prove more enduring, especially if wage growth starts to gain traction,” said Chester. “In this regard, tomorrow’s labour market report should be watched closely.”
Martin Beck, senior economic advisor to the EY Item Club, said the “downside surprise” of an inflation reading below consensus estimates was mainly down to “heavy discounting in clothing stores.”
Pressures continued to intensify in the supply chain, with both input cost and output price inflation reaching new multi-year highs.
The EY forecast remains for higher prices: “We are likely to see the effects of a weaker pound steadily pass along the supply chain to consumers, driving the CPI measure up towards three per cent in the second half of this year.”
Victoria Clarke, an economist at Investec, said: “We continue to expect inflation to climb further and to surpass the three per cent mark later this year.”
One concern is who exactly will bear the cost of weaker sterling. After the EU referendum the pound fell against the US dollar by around 16 per cent, which has caused input and factory gate prices to shoot up.
Clarke said: “Some firms may decide that the temporary nature of the input price squeeze favours a limited approach to price adjustments and that they bear a sizeable share of the burden.”
Business groups renewed calls for government to lessen that burden. Rain Newton-Smith, chief economist at the Confederation of British Industry (CBI), said: “Inflation has continued to creep higher, and we expect it to rise even further over the year ahead.
“Companies are already feeling the impact of the lower pound, with input price inflation now well into double-digits,” she said. “It’s crucial that the government doesn’t put any further pressure on firms in the upcoming Budget – top of our list is for the government to tackle the UK’s outdated business rates system.”
Andrew Sentance, senior economic adviser at PwC, said: "The trend is clearly towards higher inflation, however, and we should expect the rate of price increases to rise above the two per cent Bank of England target in the next few months.
By the end of this year, inflation is likely to be around 3pc and possibly even higher. Rising energy prices and the weakness of the pound are the main factors behind this expected increase.
Oliver Kolodseike, senior economist at the Centre for Economics and Business Research, said: “With the Bank also revising up its GDP growth forecasts for 2017 and 2018, we therefore expect the next move to be a rate rise rather than a further cut.”
He added: “However, it is unlikely that this will happen in 2017 as regular pay growth remains subdued despite low unemployment rates."
Read more: Wages are growing surprisingly strongly
The pound fell sharply on the weaker than expected data, with traders seemingly disappointed, despite the signs of inflationary pressure for companies.
David Lamb, head of dealing at Fexco Corporate Payments, said: “The trouble is inflation is rising at an anti-Goldilocks rate – neither bad enough nor mild enough. It's not fast enough for the Bank of England to hike interest rates, nor slow enough to stop economists fretting about its growth-sapping erosion of consumers’ buying power.
With average wages now rising only a shade faster than prices, the wheels could fall off the consumer boom that has so far powered the UK economy through much of the post-referendum turbulence.
Jamie Dutta, senior market analyst at Faraday Research, said Bank of England “governor [Mark] Carney’s recent comments about Britain facing ‘twists and turns’ as it departs the EU are highly pertinent.
"The triggering of Article 50 in March and the two years after this will be highly uncertain and it seems likely to us that Governor Carney will want to sit on his hands for some time regarding interest rate hikes.”