The Governor of Bank of England, Mervyn King, warned that inflation will rise sharply in the first half of this year before falling back next year.
But he said there were "large risks" that inflation could dip under or go over the Bank's two per cent target.
He said that factors over which the UK had little control, such as rising food and energy prices, are the main cause of rising prices.
King said growth would be weaker than the Bank forecast in November.
He said interest rate rises to tackle inflation were still in the balance adding: "Some people are running ahead of themselves and saying that we are pre-announcing or laying the ground for a rate rise.
"That decision has not been taken and won’t be taken until we get to the next meeting or the following meeting, or it may be many quarters."