The Consumer Prices Index (CPI) 12-month rate rose to 0.7% in the 12 months to March, up from 0.4% in February.

The increase was slightly below economists’ forecasts as the increases in the cost of fuel, transport and clothing were offset by lower food prices.

The rise follows an unexpected easing in inflation in February in part due to discounting in clothing a footwear. This discounting eased somewhat in March according to the Office for National Statistics.

Inflation is forecast to continue to rise through this year, with a sharp spike expected for April due to the effects of the easing of lockdown restrictions with consumer spending expected to tick markedly higher.

The Bank of England has forecast that inflation could reach 1.9% by the end of the year, but some economists have forecast it could exceed 2%.

Laith Khalaf, financial analyst at AJ Bell, said that whilst the inflation spike is nothing to worry about yet, investors should be on high alert.

He said: “For the moment, inflation looks well contained, but if there is a shift in inflationary expectations, this would have big ramifications for investors and markets. Bonds in particular could suffer a hefty sell-off, as their fixed income streams are particularly vulnerable to inflationary erosion. Indeed, these safe haven assets have already seen significant price falls this year, as vaccine optimism has taken hold. The shares of companies reliant on distant cash flows could also find themselves under pressure, as the discount rate used to value those earnings rises. So while consumer price rises look subdued for now, investors should be on high alert for any signs of change. Inflation is a potential problem for 2022 rather than 2021, but if markets get a whiff of it coming down the road, prices could adjust rapidly.”