Inflation is at significant risk of pushing past 5% in the coming months, policymakers at the Bank of England have warned as surging oil prices triggered by violence in north Africa add pressure to the cost of living in the UK.
March minutes of the Bank’s Monetary Policy Committee (MPC) meeting showed members voted six to three in favour of holding rates at their historic low of 0.5% – but said the case for a hike had strengthened.
As the rate of inflation increases, hitting 4.4% in February, rate-setters fear the shock decline in the UK economy at the end of last year may not have been temporary as consumers continued to tighten their belts.
The Bank has been battling with inflation well above its 2% target in recent months but has insisted pressure is coming from temporary price shocks such as rising food and oil prices.
But the committee conceded for the first time in the March minutes that inflation could top 5% in the coming months, while members also raised concerns over the heightened political tensions in north Africa and the Middle East and the stranglehold the troubles could have on oil supply.
The minutes said: “A substantial development during the month had been the increase in oil prices reflecting heightened political tension in the Middle East and north Africa and its possible impact on oil supply.”