0.6 per cent.

It doesn’t sound like a lot but that’s the UK’s highest inflation reading in 22 months.

July’s figures are the first consumer price reading since Britain voted to leave the EU in late June and the first in a slew of post-Brexit vote data we’re expecting this week.

Beating a forecast of no change, the small rise in inflation is set to be a harbinger of things to come. Here’s fastFT’s round up of what economists make of it.

Kallum Pickering at Berenberg notes that the nature of the price shifts, with food and non-alcoholic drinks prices falling, provide some tentative good news for consumers and “reflect the improving underlying economic conditions pre-vote”.

However, higher inflation is set to dampen wage increases, hitting consumers in the medium-term:

With inflation rising to at least the 2 per cent target by early next year, real wages will probably decline during 2017. As such, even as the post-vote shock eases up and confidence stabilises, consumption growth will remain below trend over the medium-term.

Suren Thiru at the British Chambers of Commerce also notes the downward impact on wages, but a slowing economy should help keep a lid on runaway inflation:

Higher inflation squeezes consumer spending and increases cost pressures on businesses. However, if economic growth slows as many expect, then price rises are likely to be limited. Such a scenario will not dissuade the MPC from cutting interest rates further in the coming months.

With most private sector forecasters expecting inflation to hit the highs of 3 per cent in 2018, the Bank of England has said it will look through rising prices and keep interest rates at historic lows.

This will deliver a “double whammy” to the country’s corporate pension pots, says Charles Cowling at JLT Employee Benefits:

The July rise in inflation heaps further woes on pension schemes that had already seen their deficits soar post Brexit as a result of the latest round of QE and falls in interest rates. With pension benefits being linked to inflation, deficits will likely worsen further, adding pressure on trustees and companies alike.

This latest news must increase the likelihood of the Brexit effect bringing down some companies and their pension schemes.

Sterling has already fallen 14 per cent against the dollar since the June 23 referendum. But Ruth Gregory at Capital Economics does not expect the exchange rate to lead to anything more than a temporary spike in prices:

If the after-effects of sterling’s 2008 depreciation are anything to go by, the drop in the pound should not have a permanent upward impact on inflation expectations or wages growth.

And don’t expect the pound’s rout to accelerate any further says Richard Falkenhall at SEB:

Most the sterling depreciation is probably over. While our forecasts suggest some further weakness against the dollar, this is due more to an expected appreciation of the dollar towards the end of this year.

We still expect the Fed to announce a rate hike at its December meeting, which is likely to benefit the dollar. However, given the lack of information on the impact of the Brexit vote on the economy so far this forecast is highly uncertain. Although the GBP is long-term undervalued, a more significant recovery seems very unlikely as long as the effects of the recent referendum on the UK economy remain unclear.

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