More rate hikes needed as economy picks up pace, says Carney

GDP should grow by 1.8pc over the next 12 months, the Bank predicts, an upgrade from the previous forecast of 1.7pc.

Unemployment will stay at very low levels, pushing average pay settlements in the private sector up from 2.6pc in 2017 to 3.1pc this year, so wages should outstrip prices in 2018.

Inflation should ease to 2.3pc by early 2019, the Bank believes. The jump in the cost of imports appears to be past its peak and the recent strengthening of the pound may help reverse some of this effect.

However, other pressures are simultaneously pushing prices in the other direction. Pay is rising faster than workers’ productivity, putting pressure on companies to raise prices. Stronger economic growth means domestic price pressures will rise and the higher oil price is also slowing the fall in inflation.

Inflation will stay stubbornly above the 2pc target in every year of the forecast, reaching 2.1pc at the start of 2021 – hence the need for more interest rate rises, to keep a lid on inflation.