The governor of the Bank of England has warned inflation could top 5% because of rising inflation expectations and higher commodity prices.
Mervyn King says in the latest MPC minutes released today there is "a significant risk inflation will exceed 5% in the near term."
The warning comes after inflation figures yesterday showed Consumer Prices Index (CPI) inflation had jumped to 4.4%, ahead of expectations.
King adds inflation could be more of a long-term issue than expected.
"The period of elevated inflation could persist for longer than the Committee expected.
"That might happen if the expected persistence of inflation above the target in the near term caused expectations of higher inflation to become ingrained, leading businesses and households to set higher prices and wages."
King says a driver of the recent spike in inflation is the weakness of sterling, and he warns that may continue.
"Inflation might also persist above target if externally generated inflation pressures continued and were not offset by exchange rate movements, or if there were further pass through from the past depreciation of sterling."
Weaker sterling means the rising price of commodities such as oil - which King notes has jumped 13% since the previous MPC meeting - is felt even more keenly.
King's warning comes ahead of the Budget later today. The Chancellor faces a difficult task of attempting to stimulate economic growth despite having little room to manouevre.
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