Bank of England governor Andrew Bailey urged business leaders to bear in mind inflation is expected to fall sharply this year when setting prices.
Speaking to the BBC’s Today programme 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.”
“When companies set prices I understand that they have to reflect the costs that they face.”
“But what I would say please is that when we are setting prices in the economy and people are looking forwards we do expect inflation to come down sharply this year and I would just say please bear that in mind.”
Bailey warned otherwise interest rates would rise again if prices continues to increase.
“We’ve got to get inflation down. Inflation is too high at the moment. Now we think that it will fall sharply really from the early summer throughout the rest of the year. And we’re pretty confident about that.”
Bailey spoke to the BBC the day after the BoE raised interest rates to 4.25%, their highest level for 14 years, after stronger-than-expected inflation figures on Wednesday.
He said he had not yet seen evidence of companies putting up prices more than necessary and said that he understood they needed to "reflect the costs they face".
Bailey said prospects for the UK economy had improved “and it is reasonable to say that there’s a pretty strong likelihood that we will avoid a recession this year”.
“But we’ve still got to put in place the conditions for much stronger growth in the economy and sustainable growth in the economy.”