Inflation in the UK could rise to as high as 5% in the year ahead, a leading economist has warned, according to the Daily Telegraph.
Tim Congdon, the former adviser to Conservative Chancellor of the Exchequer Kenneth Clarke, warned that the Bank of England has lost control of prices and said it is foolhardy to assume that prices will only fall in the coming months.
Congdon said strong levels of money supply could prompt a major rise in the consumer price index, which currently stands at 2.8%.
"It has to be said that an inflation rate of 4%-5% in 2008 or 2009 would not be a surprising sequel to the burst of money growth seen since mid-2004," the newspaper quoted him as saying.
"As far as 2008 (and probably 2009) is concerned, the UK economy must either suffer a period of asset price weakness and beneath-trend growth or above-corridor inflation. That conclusion seems to me inescapable."