Following the vote by Britain to leave the European Union, the weaker British pound has helped exporters and tourism by making British products cheaper abroad.
But Forsyth Broker Lyn Howe says the latest inflation data is the first sign the weak exchange rate can be negative, as well as positive.
Inflation rose to its highest level in November as the annual consumer price index reached 1.2%.
Rises in the prices of clothing, motor fuels and a variety of recreational goods were the main contributors to the increase. Most of those goods were imported and the prices were affected directly by the movement in the exchange rate, she said.
Although the competitive nature of retail food outlets in the lead-up to Christmas kept food price increases at bay, it seemed only a matter of time before food and other staples would follow other prices higher due to the falling value of the pound.
"If inflation does maintain its upward trajectory, the Bank of England will need to reconsider the interest-rate path it takes following its aggressive easing stance post Brexit."
Higher inflation being controlled by higher interest rates would reduce business and consumer spending power as the cost of borrowing increased, Ms Howe said.
With unemployment at historically low levels and vacancies at cyclical highs, wage growth was likely to head higher. In that environment, firms would be able to pass on a significant amount of the "cost push" inflation.
The pound had dropped to levels prevailing from the 1970s to the early 1990s when the economy was already slightly overheated. Monetary policy remained "extremely loose" and oil prices were no longer an inflation dampener, she said.
"This could be a recipe for the BOE to backtrack fast and tighten more quickly than expected."
The BOE left rates unchanged in the last meeting before the end of the year and seemed set to allow inflation to run on while the uncertainty of Brexit continued. If inflation did not ease back as the bank expected, it might be forced to act sooner than expected, Ms Howe said.
Once the worries about Brexit reduced, the pound might not remain as competitive as it had been in recent months. The UK’s current account deficit was likely to retract rapidly if the currency remained at current levels.
Global capital was still seeking a home and the UK should start looking attractive at those prices, she said.
However, the UK’s new-found competitiveness might be fleeting. An appreciating current in 2017 could result in a boom-bust scenario for the UK during 2017 and 2018.
The UK Government had given the strongest signal yet the Brexit process could take longer than the two years needed for the official Article 50 exit process to be completed, Ms Howe said.
The Chancellor, Philip Hammond, previously said most "thoughtful" politicians, officials and businesses from Britain and the rest of the European Union realised the two-year deadline was not achievable.
The Government position was becoming clearer. By the end of the Article 50 timetable, which the Government believed would be March 2019, the UK would have legally agreed to leave the EU.
"But it will not be jumping off a cliff. Rather, Britain and the EU will still have a close relationship and many EU rules will remain in place. They will slowly be unravelled over subsequent years as Brexit is made a reality."
Many businesses would welcome the strong guidance from the Treasury. The financial services sector, and other large UK businesses, feared the substantial amount of work needed to reformulate the relationship with the rest of the EU was not possible in two years, she said.
Mr Hammond appeared to be preparing the ground ahead of the next election. By the time Prime Minister Theresa May went to the country in 2020, the UK would have agreed to leave the EU. But in practical terms, it might well not have actually left.
