City analysts were predicting May as the date for the next rate rise yesterday, less than a week after the monetary policy committee lifted rates by a quarter percent to 4 percent.

The predictions for another quarter point raise in May, by Kit Juckes at RBS Financial Markets and Economist David Hillier at Barclays Capital, came on the back of the Bank of England’s quarterly Inflation Report, which predicted inflation pressures were firmly upward.

In its Report, the Bank said that although inflation was well below target at only 1.3% on the new CPI measure, it was expected to move up in the middle of this year, partly as a result of higher utility prices. However, it said that inflation was not expected to breach the 2% target level for two years.

The Bank of England Governor Mervyn King stressed that the trend in inflation was upward, saying, “It is crucial to bear in mind that, in the central projection, inflation is continuing to rise at the two-year horizon and that the risks, although broadly balanced, are nevertheless considerable in both directions.”

Despite the strong growth forecast, the report warned the economy could suffer next year as a result of the strong pound, which "may act as a drag” on exports.

The Bank repeated its November warnings that house prices had continued to rise at an "unsustainably rapid rate", although it said household borrowing had moderated a little.