According to Bank of England deputy governor Charles Bean, Britain had entered a "hazardous" period and inflation could be above target next year.
Bean said today in an interview with The Times that he was not expecting inflation to be way above target, but just moderately above target.
He was quoted as saying that there was also a risk of a more ''anaemic'' recovery than what the bank had projected.
He said the country was in an economy which was recovering from a very deep recession and where there was still a substantial margin of spare capacity where unemployment was elevated.
He further told The Times that among other risks the economy was faced with were the crises in Japan and Libya.
He said that when one set policy, one weighed up multiple risks in different directions.