According to the latest release from the Office for National Statistics (ONS), the annual Consumer Prices Index (CPI) inflation rate for August 2017 was 2.9 percent.
Martin Beck, lead United Kingdom economist at Oxford Economics, said: "Annual CPI inflation of 2.6% in July was unchanged from the previous month, offering some cause to think that "peak-pain" for consumers from elevated inflation had been reached".
CPI was last higher in April 2012 when the rate reached 3%.
Excluding energy, food, alcoholic beverages and tobacco, core inflation rose to 2.7 percent in August from 2.4 percent in the prior month.
"Rising prices for clothing and motor fuels were the main contributors to the increase in the rate between July and August", the ONS said. The current rate of inflation is the highest in five months.
Last month, two of the nine-member Monetary Policy Committee voted to increase interest rates from their record-low of 0.25%.
While most economists forecast that the bank will again abstain from tightening monetary policy, the GBP/USD exchange rate may still rise if BoE Governor Mark Carney strikes a more hawkish tone in his following statement.
The all-India general CPI inflation accelerated to 3.36% in August 2017 (new base 2012=100), compared with 2.36% in July 2017.
Households have seen their spending power come under sustained pressure from lacklustre wage growth and higher inflation, triggering an increase in credit and a decline in savings.
Mike Prestwood, ONS head of inflation, said: "Clothing prices rising faster than previous year, along with a hike in the cost of petrol, helped nudge inflation upwards". Household goods and services inflation was 4.24%.
"The staggered impact on the housing index of the CPI, of the revision in HRA (house rent allowance) of central government employees, is likely to continue to push up housing inflation further over the coming year", Ms. Nayar wrote.
The most recent wages data showed average weekly earnings rising at an annual pace of 2.1%.
"Looking ahead, price pressures are set to rise further", said Shilan Shah, an economist at Capital Economics in Singapore.
Manufacturing production also grew slightly by 0.1 percent after a 0.5 percent contraction in June due to the economic reforms. The price of petrol rose by 1.8p a litre to 115.7p in August, while diesel picked up by 2p to 117.6p.
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