The recent sharp rise in energy prices is likely to push the rate of inflation this month to between 3.5% and 4% - up from 2.7% in February, according to Bank of Ireland.
It expects the recent surge in petrol and diesel will add 0.5% to the increase in the cost of living while the "enormous" 70% to 80% rise in home heating oil prices will add between 0.6% and 0.7%.
In a research note, the bank's chief economist Conall Mac Coille said inflation "will also be pushed up by the indirect impact of energy prices onto food and other items".
He added: "Over the weekend, Government figures have indicated a cut in excise duty is likely".
But Mr Mac Coille said the "the quantum of any action is unclear" and will not be felt until April’s inflation data.
Mr Mac Coille said Bank of Ireland had forecast consumer spending would grow by 2.3% in real terms this year.
But that projection may be cut by 1% to 2% if higher energy prices are sustained as Irish households may reduce how much money they are saving to adjust to elevated fuel costs.
However, he cautioned there was an "enormous degree of uncertainty" regarding how events in the Middle East play out.
He said the markets are now pricing the likelihood of three interest rate increases by the European Central Bank this year, which would see the main rate increase from its current level of 2% to 2.75%.
He said stock markets and bond markets "now seem to be pricing in the likelihood of more sustained disruption to oil supply".
That has resulted in an increase in borrowing for European countries, including Ireland, where the yield on 10-year Government bonds is now 3.35% up from 3% in January.
