"These companies must choose whether to absorb the increase or pass it on to consumers. Assuming at least some will choose the latter route, this could lead to higher consumer prices down the line."
ONS, who publishes the data, says the rate is "relatively low in the historic context although it is above the rates experienced in 2015 and early 2016".
The main upward contributors to change in the rate were rising food prices and air fares, which were offset by falls in hotel accommodation prices, in addition to smaller rises in the prices of alcohol, and clothing and footwear than a year ago.
Ben Brettell, Senior Economist, Hargreaves Lansdown, commented: "Economists had been expecting inflation to rise for the third consecutive month in August, as retailers passed rising import costs on to consumers. These companies must choose whether to absorb the increase or pass it on to consumers. Assuming at least some will choose the latter route, this could lead to higher consumer prices down the line.
"As such the effect of sterling’s depreciation will take time to feed through fully into the figures, as businesses gradually adjust to the new environment. Over the next few months existing inventories will be wound down and currency hedges put in place by supermarkets and other importers will gradually start to fall out of the equation. It is only then that the full impact will be seen.
"Forecasts suggests the drop in sterling will ultimately add around five percentage points to the Consumer Prices Index, but it’s as yet unclear whether that will come via a gradual uptick in the inflation rate over a couple of years, or a shorter, sharper bout of inflation over the coming months. The Bank of England forecasts consumer price inflation will hit 2% this time next year."
Alex Brandreth, Deputy CIO at Brown Shipley, added: “It was expected that the effects of a weaker sterling following the Brexit vote would be a contributor to a higher inflation figure. It is important to note that the large falls in the oil price in previous years are starting to drop out of the annual calculation methodology.
“Over the next six months it is likely that we will continue to see these trends push inflation higher in the UK with the oil price hitting its low in January 2016. No doubt the general public has noticed the impact at the pump. However, over the long term, we have described future higher inflation levels as “trying to light a fire in a swamp” because it is difficult to see inflation moving significantly higher, when consumers are generally still unwilling to borrow and wage inflation remains relatively low.”
