The inflation outlook remains murky with risks to the upside, Bank of England (BoE) governor Mervyn King said today.
The governor told parliament's Treasury Committee that falling energy prices would make inflation volatile, which the Monetary Policy Committee would have to look beyond.
"In February the judgement of the committee was that the central projection for CPI inflation some two years ahead was around the 2 per cent target but with the risks to the upside. The balance of the news since then provides no clear reason to change that judgement," he said.
Economists said another rate hike was still on the cards. The BoE held borrowing costs at 5.25 per cent at its last two monthly meetings.
The pound initially dipped after Mr King said the housing markets was starting to slow following three interest rate rises since August.