The Office for National Statistics said today that consumer prices rose by 0.4 percent on the month. Expectations of a fall in inflation by as much as 0.2 percent have not been realised and this may make it easier for the Bank of England to raise rates early in February.

At the weekend reports indicated that inflation might fall to 1.1 percent, putting the likelihood of an interest rate rise next month into doubt.

The Bank’s Monetary policy Committee kept interest rates steady for December and January after raising them 0.25 percent in November – the start of what many analysts believe is a gradual climb to around 5 percent by the end of the year.

Today’s figures will make it easier for the MPC to decide that February is the right time for the next increment of a quarter point to 4 percent.

Coincidentally, a think-tank report at the weekend said the economy will grow by 3 percent this year and interest rates will rise to 4.75 percent by December.

Ernst and Young's ITEM club, which uses the same economic forecasting model as the Treasury, said the economy was being supported by an improvement in the global economic picture, a recovering private sector and the continuing strength of the public sector.

ITEM club’s chief economic adviser Peter Spencer said, "We now have a UK economy in a more robust state than for the last couple of years. It is possible that the Chancellor will meet the lower end of his growth forecasts for 2003 and 2004."