A statement issued by LB said it was increasing its inflation forecast to 2.7% this year, significantly up from an estimate of 1.6% in December 2016.
However, Gross Domestic Product (GDP) remains expected to grow by 3% this year, in line with the previous forecast.
Rises in the oil price after historically low prices during 2016 had already been seen affecting fuel prices, but would continue to filter into the prices of goods and services during 2017, LB said, with food prices likely to continue current rises in coming months.
"Uncertainty" about the effect of liberalization in the gas sector might also drive prices north, LB said.
In recent weeks LB's economists have been suggesting annual inflation would be around 3% this year.