This is the highest rate since July 2014, when it was also 1.6%, the Office for National Statistics (ONS) said.

Analysts had predicted consumer price inflation (CPI) would rise to 1.4% last month.

The weakening pound appears to be the major contributor towards higher prices.

Sterling has been sliding since last June’s EU referendum result and dipped below the $1.20 mark on Monday ahead of prime minster Theresa May’s speech today, which is expected to signal a ‘hard’ Brexit.

“We could see sterling fall even further in the lead up to the prime minister pulling the trigger on Article 50. This will translate into further inflation in the short term,” said Tom Stevenson of Fidelity International.

“Indeed, some of Britain’s biggest retailers have already warned that they may have to raise prices as they are forced to pass on higher costs of importing goods from abroad to customers.”

‘A dreadful time to be a saver’

Rising inflation is of course bad news for savers as it erodes the value of their cash in real terms.

Savers are already having to contend with record low rates, with rate reductions in the savings market outweighing rate rises for 15 consecutive months, according to Moneyfacts.

Figures from the data firm show just 44 of 669 savings accounts currently on the market can beat or match inflation.

“With inflation expected to rise significantly over 2017, it is sadly going to stay a dreadful time to be a saver. While there was a welcome slowdown in the number of cuts to savings rates last month, consumers will remain underwhelmed by the lack of competition for their cash,” said Rachel Springall, finance expert at Moneyfacts.

Tips for savers

While savers may feel discouraged, they are advised to keep on top of the savings market, even if just a fraction more can be gained in interest.

Springall said: “Since the start of 2017 we have seen a small selection of providers making minor improvements to their savings rates, which includes challengers such as RCI Bank, Post Office Money, Ikano Bank and Sainsbury’s Bank. While this is positive news, there is still a significant way to go before we can see rejuvenation in the market.

“Savers would be wise to consider dividing their investments across regular savers, current accounts, fixed rates and instant access for the best possible chance of decent interest rates, while maintaining some flexibility.

“Failing this, savers who would typically be warier about where they place their hard-earned cash could turn to riskier investments to attempt inflation-beating returns, which is cause for concern if done without proper guidance.”

Research published on Monday by rate watcher Savings Champion revealed a third of new issues of savings accounts launched so far this year have come with rate rises rather than cuts, reversing the trend seen over the past 12 months.

Director Anna Bowes said this could be the first hint of a rate war in the offing.