The Bank of England raised its growth and inflation forecasts on yesterday and warned Britons they should be wary about taking on more debt, especially as the risk of a housing market crash has increased.

A week after the bank raised interest rates for the first time in nearly four years, its quarterly inflation report showed inflation staying above its 2.5 per cent target for most of the forecast period and rising fast at the two-year horizon.

The bank is charged with keeping inflation at 2.5 per cent at all times and its new bullish forecasts reinforced expectations that interest rates are headed up. Futures markets are pricing in rates at more than 5 per cent by the end of next year.

The forecasts came as new figures showed that unemployment rose slightly in the three months to September, but statisticians said the overall trend remained downwards.

The Office for National Statistics reported that the Labour Force Survey measure of unemployment showed a rise of 12,000 in the period to 1.48 million, or 5 per cent of the workforce. - (Reuters)