Bank of England boss warns firms that raising prices will trigger higher interest rates

Bank of England governor Andrew Bailey has warned businesses that raising prices to "beat inflation" will force further rises in interest rates. He urged companies to think twice before putting up prices, a day after the Bank's Monetary Policy Committee hiked interest rates to a 14-year high of 4.25 per cent. But industry leaders warned that firms could be forced to cut jobs or even go under if they followed his suggestion.

- TARA COBHAM & ALASTAIR JAMIESON

In an interview with BBC Radio 4's Today programme, Mr Bailey said: "I would say to people who are setting prices, please understand: if we get inflation embedded, interest rates will have to go up further, and higher inflation really benefits nobody. If all prices try to beat inflation, we will get higher inflation." Mr Bailey said higher inflation "hurts people, and it particularly hurts the least well off in society".

Food and drink prices have seen some of the sharpest price increases in recent months, along with energy bills. The UK Consumer Prices Index (CPI) inflation figure unexpectedly jumped in February, to 10.4 per cent. Dairy products are among the food items that have shot up in price, with low-fat milk surging by 42 per cent in the year to February, cheese by 35 per cent, and eggs by 32.5 per cent.