King warns on inflationary pressures

Mervyn King served notice that rates may have to rise even though the Bank of England sees inflation as likely to drop back this year from March's breach of the 3% target.

"The Monetary Policy Committee will be watching closely indicators of capacity

pressures, pricing intentions and inflation expectations, he said in a speech to the Welsh CBI. "If these indicators remain elevated, the MPC may need to take further action."

The spike in inflation, he said, had been caused by increases in gas and