The leading think tank believes that the increase will have an “impact on real disposable income”.
Last month, the Office for National Statistics revealed that inflation rose by 1% in the year to September 2016, up from the 0.6% figure recorded in August.
The rate of inflation in September was the highest since November 2014 (also 1%).
The NIESR also forecast that the economy will grow 2% in 2016, before slowing to 1.4% in 2017.
It also stated that due to Article 50 being triggered in 2017, there are “downside risks to next year’s outlook” and expected the Monetary Policy Committee to keep the base rate at 0.25% until 2019.
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Commenting on the impact of rising inflation, Trevor Greetham, head of multi asset at Royal London Asset Management, said: “Bank of England governor Mark Carney has said he is willing to let inflation rise rather than tightening policy as the negative impact of Brexit negotiations hits the economy.
“…Janet Yellen [the chair of the board of governors of the Federal Reserve System] has also been reluctant to raise [US] rates despite the low unemployment rate.
“In both cases, central bankers point to downside risks to the economy from high levels of national and personal debt.
“In reality, they have a strong incentive to allow inflation to overshoot to help reduce the burden of debt on the economy.”
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