Business leaders in the West Midlands and throughout Britain braced themselves for at least one more interest rate increase from the Bank of England and continued pressure from a high-priced pound yesterday after National Statistics reported the highest inflation since 1991.
"This is not what the region's business community wanted to see," said Ronnie Bowker, senior partner of Ernst & Young in the West Midlands.
"It is a sure-fire sign that interest rates will be pushed to the 5.5 per cent mark when the Monetary Policy Committee meets next month.
"Clearly recent falls in energy costs have not been enough to reduce inflation and the MPC is likely to conclude that it has no alternative but to increase interest rates. I hope that this is the peak for inflation and that a quarter-point rate rise will reduce inflation in the coming months."
At Birmingham Chamber of Commerce and Industry, Charlotte Ritchie, policy adviser, said bluntly: "This is not good news. Even before the inflation announcement the MPC was under pressure to put up interest rates.
"House prices are continuing to rise and factory gate prices in March rose at their fastest rate for nearly a year. That is food and drink for those on the MPC already committed to increasing rates.
"Rising inflation is bad news for any economy and businesses will acknowledge that the Bank of England has an important role to play in controlling it.
"And then there is the news that sterling has today topped the $2 mark.
"However increasing interest rates will make it even more difficult for UK firms to compete in the global market. Exporters, especially manufacturers who sell to the US, will be already suffering as a result of the strength of sterling.
"Businesses will have to hope that inflation will begin to fall soon, which may be realistic given the Bank of England's own projections and news that the global price of some raw materials should stabilise during 2007 due to extra supply.
"In the meantime, we ask the MPC not to squeeze businesses more than necessary with a major jump in interest rates."
At the manufacturers' organisation EEF, Steve Radley, chief economist, argued that the impact of a two-dollar pound depends largely on the extent of any slowdown of growth in the US.
"So long as export markets remain strong, the primary effect of a two-dollar pound will be on manufacturers' profit margins rather than on their order books.
"However, if a further slide in the dollar was driven by a significant weakening in the US economy, we would expect to see far more manufacturers feeling the pain," he said.
Mr Radley accepted that last month's surge in inflation leaves the Bank with little option but to raise interest rates again in May.
But he added: "We would urge the Bank to move cautiously and take into account the impact of its measures on the exchange rate."
Howard Archer, chief US and European economist at the consultants Global Insight described the inflation numbers as "a thoroughly nasty set of data that essentially guarantees the Bank of England will raise interest rates by a further quarter point to 5.5 per cent in May".
He added: "There is a markedly increased possibility that interest rates will rise further still further out." There was also a "very real risk" the retreat from inflation the Bank has forecast for later this year will be slower and less marked than expected.
Ian Kernohan, an economist at Royal London Asset Management, agreed: "Interest rates will rise in May and the market is now pricing in at least one further rise this year." Risks to both growth and interest rates next year are now "definitely on the downside," he added.