The Centre for Economics and Business Research (Cebr) has said that the Bank of England (BoE) should hike UK interest rates by 25 basis points at its next meeting on Wednesday.
The London-based economic consultancy said the monetary policy committee (MPC) would then have until November to "evaluate if the loosening in the labour market is having the desired effect on domestic inflationary pressure".
It warned that UK inflation, which currently stands at 6.8%, is still too high.
Currently the Bank Rate is 5.25% and despite governor Andrew Bailey telling MPs recently that rates are near the top of the cycle, speculation is growing that the MPC may vote to raise it by another 0.25% to 5.50%.
Last month, the Office for National Statistics (ONS) revealed that Consumer Prices Index inflation was 6.8% in July, down from 7.9% in June.
It was the lowest rate since February 2022 but still represents a sharp increase in the cost of living for Brits over the past year, and is above the Bank's 2% target.
"Core inflation and services inflation are not yet moving in the right direction which suggests that wage pressures are still feeding through into higher prices," the Cebr said.
"The recent sharp uptick in global oil prices should be a warning — any potential new exogenous shock could quickly change the picture and reignite an inflationary spiral."
Read more: House prices: Is it better to rent than buy?
It comes as the European Central Bank (ECB) raised rates by 0.25% last week despite the gloomy economic outlook for the currency bloc.
Across the Atlantic, the US Federal Reserve is expected to hold rates steady this month, benefitting both from weaker inflationary dynamics and a stronger economy.
Cebr warned that a recent rise in oil prices shows that central bankers cannot rely on endlessly falling energy prices to bring inflation back to its 2% target.
For most of the year, central bankers had help from falling energy prices and base effects, meaning that inflation duly ticked downwards month after month.
However, going forward policymakers may no longer be able rely on falling energy prices to do most of the heavy lifting in the fight against inflation as oil prices have shot up by almost a third over the past weeks. Prices hit as high as above $90 per barrel earlier this month.
"Feeding the higher oil prices into our inflation forecast, shows that inflation will still stand at around 5.0% by Christmas. Considering that higher oil prices not only impact fuel prices but also the input costs of businesses across the economy, the impact could be even larger."
However, separate research from the EY ITEM Club said a September increase should set a ceiling on rates, although there is a strong case for the BoE's Monetary Policy Committee (MPC) to adopt a "wait-and-see" position in its next meeting.
"On the subject of inflation, data for August, published the day before the MPC’s decision, presents a wildcard which could swing September’s vote either way," Martin Beck, chief economic adviser to the EY ITEM Club, said.
“If the MPC does go for another rise, the EY ITEM Club thinks a further cooling in the labour market, downward pressure on services inflation as less expensive energy feeds through and likely policy pauses by other major central banks mean a September rate increase will prove to be the last in the current cycle.”