INFLATION could still rise above five per cent this year, economists at Barclays claimed yesterday.
The announcement surprised analysts after consumer price inflation sank to four per cent in March, from 4.4 per cent the previous month.
However, strong upwards pressures in food and energy costs will drive inflation to a peak of 5.1 per cent in the consumer price index, Barclays forecast.
Hikes in duties on alcohol and tobacco from last month’s Budget will also push prices further upwards, Barclays said.
“The higher inflation profile we now expect during the remainder of this year will make it hard for the Bank of England to resist pressure to raise rates indefinitely,” it added.
Bank governor Mervyn King (pictured) previously warned that inflation could reach the five per cent mark in 2011, yet many analysts now expect price pressures to linger closer to four per cent. “The dreaded five per cent rate that we had once feared now looks unlikely to be realised,”Andrew Goodwin of the Ernst & Young Item Club said.