The Office for National Statistics (ONS) cited clothing, hotel and fuel prices, which remained static, having fallen a year ago, which suggested the weaker pound might be starting to hit import prices.
The ONS added the upward pressures were offset the falling cost of air fares and food.
Analyst expectations were said to be for a 0.8% inflation figure, with commentators predicting that a post-Brexit sterling decline could grip tighter.
Tom Stevenson, investment director for personal investing at Fidelity, said while 1% is still a long way off the Bank of England’s (BoE) 2% target, further rises are to be expected as the currency impact takes hold.
“Indeed, 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 said.
He warned that while BoE governor Mark Carney may be willing to withstand inflation “overshooting” for the next year or so, savers sitting in cash will struggle to generate returns and encouraged them to look to risk assets.
Stevenson said: “To stand any chance of generating an inflation-adjusted real return they will need to look further up the risk spectrum, investing in bonds issued by companies rather than the government or moving into stocks and shares.”
Ben Brettell, senior economist at Hargreaves Lansdown said while rising inflation, which “could easily exceed the 2% target in 2017” will be tough on those with low incomes, it was also bad news for savers.
Yet he highlights that unless it continues to drop, a weaker sterling should be seen as a “one-off” factor, which will fall outside next year’s calculations.
He said Carney has indicated current inflation rises should be temporary and the Monetary Policy Committee will likely keep rates low to support the economy.
Brettell said: “In the aftermath of the financial crisis the Bank of England was prepared to tolerate a spike in inflation to more than 5% while leaving rates at rock bottom.”
He added the demographics of the UK posed very few inflationary pressures: “The baby boomers are starting to retire in their droves. They have already gone through their consumption phase – they have bought their houses, cars and consumer goods.
“The generation behind them is saddled with debt and struggling to get on the housing ladder. There is also no sign of any tightness in the labour market, with wage growth seemingly set to remain depressed. All this should mean less inflationary pressure, lacklustre economic growth, and little upward pressure on interest rates.”
AJ Bell investment director Russ Mould said the move was the first real evidence of Brexit hitting people’s wallets.
“Marmitegate was the sign of things to come as the cost of imported goods and raw materials from abroad increases due to the weak pound and this could lead to further price rises over the coming months.
“This would have a real impact on the spending power of people’s salaries and could be the first time they have felt any pain from the vote to leave the EU.”
Mould said from an investment perspective, some inflation was not necessarily negative for stock markets and was preferable to deflation or stagflation.
“However, if too much inflation causes the Bank of England to raise interest rates or drives Government bond yields higher then investors could be lured away from stocks and back toward cash or bonds, removing some of the support given to share prices by the premium yield that is currently available from equities.”
