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11 May 2011
Last updated at 06:05 ET
The governor of the Bank of England, Mervyn King, has warned that higher utility bills could push inflation to 5% later this year.
Publishing the bank's latest Inflation Report, he said there remained strong downward pressures on economic growth and upward pressures on inflation.
However, he said that the "big picture" had not changed much since the last report in February.
The Bank still expects inflation to fall back in 2012 and 2013.
Several analysts have said they expect domestic fuel bills to rise this winter.
On Monday Centrica, which owns British Gas, said domestic prices did not reflect what the company pays on the wholesale market.
Mr King said there was "a great deal of uncertainty about the outlook for inflation".
It meant that inflation "may not fall back as strong as expected", he said.
The Bank's latest Inflation Report has "pencilled in" an assumption that gas prices may rise 15% and electricity prices by 10% this winter.
Higher food costs were also contributing to inflation's rise this year.
Despite these short-term impacts on inflation, Mr King said: "Our medium term judgement about inflation and growth is broadly the same as in February."
However, the Bank still expects such cost pressures to ease and for inflation to begin falling to its 2% target next year.
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Publishing the bank's latest Inflation Report, he said there remained strong downward pressures on economic growth and upward pressures on inflation.
However, he said that the "big picture" had not changed much since the last report in February.
The Bank still expects inflation to fall back in 2012 and 2013.
Several analysts have said they expect domestic fuel bills to rise this winter.
On Monday Centrica, which owns British Gas, said domestic prices did not reflect what the company pays on the wholesale market.
Mr King said there was "a great deal of uncertainty about the outlook for inflation".
It meant that inflation "may not fall back as strong as expected", he said.
The Bank's latest Inflation Report has "pencilled in" an assumption that gas prices may rise 15% and electricity prices by 10% this winter.
Higher food costs were also contributing to inflation's rise this year.
Despite these short-term impacts on inflation, Mr King said: "Our medium term judgement about inflation and growth is broadly the same as in February."
However, the Bank still expects such cost pressures to ease and for inflation to begin falling to its 2% target next year.
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