Britain's consumer price index inflation (CPI) rate was firmer in September, as it reached the highest level since November 2014, according to official data released on Tuesday (18 October).
The Office for National Statistics (ONS) said the main upward pressures on inflation were rising prices for clothing, overnight hotel stays and motor fuels, as well as gas prices. These upward pressures, however, were partially offset by a fall in air fares and food prices.
According to the ONS, inflation grew 1% year-on-year in September, compared with analysts' expectations for a 0.9% increase and after climbing 0.6% in August. On a month-on-month basis, meanwhile, inflation edged 0.2% higher, in line with expectations and slightly below the 0.3% gain posted in the previous month.
Paul Hollingsworth, UK economist at Capital Economics, warned the sharp drop in sterling on a trade-weighted basis since the referendum has put inflation on a steeper upward trajectory for the next few years.
"We think that CPI will breach the Monetary Policy Committee's 2% target around spring next year, and will peak at about 3.2% in the first half of 2018, once the direct and indirect effects of the pound's fall have had time to feed through," he added.
Tom Stevenson, investment director for personal investing at Fidelity International, said future rises in CPI will spell troubles for savers.
"Inflation is expected to continue its upward charge, with some economists predicting that CPI could reach as much as 3% by next year, considerably overshooting the Bank of England's target," he explained.
"While the Bank of England Governor Mark Carney may have said that he is willing to tolerate inflation overshooting for the next year or so, savers are less likely to be so accommodating. Anyone with their savings still sitting in cash will struggle to generate real returns in this ultra-low interest rate and rising inflation environment."
On Monday, Bank of England Deputy Governor, Ben Broadbent, said the pound's sharp decline in the four months since Britain's referendum on the European Union has acted like a "shock absorber" for the British economy.
Sterling has plunged almost 20% since Britain voted in favour of leaving the 28-country union in June and has lost over 6% in the last two weeks after Prime Minister Theresa May floated the prospect of a "hard Brexit". Broadbent said that having a flexible currency was "extremely important" to cope with economic shocks.
A survey released by the EY Item Club warned that Britain is facing four years of subdued economic growth as it negotiates to extricate itself from the EU. The think tank said it expects the economy to expand 1.9% this year, in line with its July forecast, but predicts growth to slow to just 0.8% in 2017.
Consumers' pockets are expected to take a hit over the coming months as the weak pound pushes inflation up to 2.6% next year, the report added.