Inflation may hit 5% level

New Bank of England forecasts have stated that UK inflation will move even closer to 5% before experiencing a rapid fall.

The announcement comes in the wake of revelations that the month of July saw the UK rate of inflation rise to 4.4%, the highest level since records began in 1997.

According to the new projections by the Bank of England's quarterly Inflation Report out today (13 August), the rate is however expected to fall below the central bank's 2% target over the next two years, as long as interest rates stay at 5%.

At a news conference, the bank's governor, Mervyn King, said: "The next year will be a difficult one, with inflation high and broadly flat."

"But with monetary policy focused on its task of bringing inflation back to the target, we will come through the adjustment."

The forecast has raised hope that the bank may consider cutting interest rates soon, as the threat of recession worsens.