The Bank of England has hinted that British interest rates may go up again soon.
In its quarterly inflation report, it said the British economy was set to grow rapidly and inflation was likely to pick up sharply.
Only a week after the central bank raised interest rates for the second time in three months, Governor Mervyn King said that although inflation would be at its 2% target in two years, it was expected to keep rising after that.
The BoE report showed economic growth picking up even further above trend, rising at a rate of more than 3% for most of the next two years.
It predicted that inflation, though now running below its 2% target at 1.3%, would accelerate through this year, as policymakers continue to fret over the boom in house prices and consumer debt levels.
The BoE raised interest rates by a quarter-point to 4% last week, citing recovery in the global economy and continued strength in consumer debt and house prices. Most analysts are now predicting further rate increases later this year as the bank tries to keep a lid on house prices and borrowing.
'House prices have continued to rise at an unsustainably rapid rate,' the BoE warned in its latest report, adding that it was too early to say whether the recent record increases in unsecured borrowing were turning down in any significant manner.
