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Inflation may hover above 2% target until 2015

Inflation may hover above 2% target until 2015

Inflation in the UK could rise further and hover above the 2% target for the next two years, the Bank of England has warned.

Despite the consumer price index (CPI) holding firm at 2.7% for a record four months in a row, the Bank's quarterly report on inflation raised the possibility of further spikes.

There have already been a string of fund managers voicing their concerns about inflation, and on Tuesday analysts at Barclays Capital said they too expected inflation to climb.

The Bank of England said current pressures on the rate of inflation included university fees - now at an eye-watering £9,000 average - and household energy bills.

'Despite subdued pay growth, weak productivity has meant no corresponding fall in domestic cost pressures,' the Bank said. 

'CPI inflation is likely to rise further in the near term and may remain above the 2% target for the next two years.'

Further ahead, the Bank expects inflation to fall back in line with its 2% target.

It expects a 'gradual revival in productivity growth' to dampen increases in domestic costs and help price pressures to fade.

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