Inflation could hit 5pc within months, says Bank of England

The Bank of England has warned that inflation is in danger of rocketing above 5pc in the coming months, piling more pressure on policymakers to raise interest rates.

Its warning will ratchet up fears that inflation is spiralling out of control, fuelled by a step-change in the Bank’s position in less than a month.

In the February Inflation Report, it forecast inflation peaking at 4.5pc in the three months to September. Minutes for this month’s Monetary Policy Committee (MPC) meeting, however, warned of “a significant risk that inflation would exceed 5pc in the near term”.

Concerns about escalating inflation appear to be persuading more members of the nine-strong MPC that it is time to raise rates. The minutes showed that the same three members voted for a rate hike as in February but suggested others are now more ready to join them.

Markets already expect at least two rate rises before the end of the year and the Bank’s own forecasts are based on a rate rise by June.

Referring to the five members who voted for policy to be left unchanged this month, the minutes said: “Others thought that, given further upwards revisions to the near-term outlook for inflation, the case for an increase in Bank Rate had strengthened in recent months." (read more)