Inflation is predicted to outstrip government predictions as Bank of England governor Mervyn King said rising fuel costs would push it to 5 per cent for 2011. The Bank also slashed growth forecasts for the UK economy, predicting that growth would not exceed 1.7 per cent this year. King said Britain's economy had deteriorated since the last quarterly inflation report was issued in February.

Two per cent growth for 2011 was forecast earlier this year, but this figure was revised, with the Bank also predicting that GDP for 2012 will not attain the 3 per cent figure issued in February, with the expectation downgraded to 2.2 per cent.

As for inflation, King said he expected the figure to fall in 2012 and 2013, however noted that higher commodity and import prices and the raising of VAT in the United Kingdom to 20 per cent were likely to force the consumer price index (CPI) up to 5 per cent for this year. The governor added that "a great deal of uncertainty" must shroud all such predictions because of unstable global commodity prices.

King said the announcements reflected a slight worsening in the medium-term forecast, but insisted that in the long run the outlook remains effectively unchanged. News of rising inflation is likely to amplify the negative effects of the current economic downturn for many Britons, with the country's economy increasingly dependent on foreign imports and as such susceptible to commodity price fluctuations and the devaluation of the pound relative to rival currencies.