Interest rates may be increased again as there is still a risk of inflation continuing to rise throughout the year, the Bank of England has warned.
The Bank released its quarterly inflation report this week, in which it noted that falling energy prices are helping to lower inflation.
However, governor Mervyn King said: “The crucial question for the Bank is where inflation is likely to be once energy prices have settled down.”
Should inflation remain high, it may well spur further rises in the base rate as it has now done four times since August 2006.
“The window of opportunity for higher rates is over the next three months,” economic analyst David Brown told the BBC.
In March it was revealed that inflation had breached a three per cent upper limit imposed by the chancellor.
The Bank of England predicts that it will take two years to bring it back down to a target level of two per cent.
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