Utility bills 'will fuel inflation'

10/08/11

Dan Smith

Inflation could rise as high as 5 per cent in the months to come, the Bank of England has predicted, with utility bill increases fuelling price growth.

According to the Bank's latest estimates, it might also take three years for the UK economy to recover properly from its recent downturn.

This year might only see GDP growth of 1.4 per cent, the organisation suggested, which is down on the 1.8 per cent prediction it made in the spring.

With household incomes continuing to be squeezed by high prices and weak pay rises, the Bank added that sluggish growth will probably be witnessed in the short term.

Bank governor Sir Mervyn King said: "There are a number of headwinds to world and domestic growth over the forecast period, not least the private and public debt overhang. And these headwinds are becoming stronger by the day."