Bank of England faces 'perfect storm' as Trump measures could affect interest rates

Britain is facing the return of a full-blown cost-of-living crisis that could have major implications for interest rates, a former Bank of England policymaker has warned, with inflation poised to soar back above 5% as early as this autumn.

In a stark intervention, Andrew Sentance - a former member of the Monetary Policy Committee - said a "perfect storm" of global trade tensions, rising wages, and spiralling utility bills is set to send prices soaring once more, heaping fresh pressure on families and businesses. And he warned the Bank of England to 'hold fire' on any possible cuts to interest rates.

Official figures currently put UK inflation at 2.8%, having dipped to the Bank's 2% target last summer thanks to falling food and energy prices. That drop prompted a series of interest rate cuts - from 5.25% to 4.5% - offering some relief to mortgage holders.

But Sentance has now warned that the downward trend is reversing rapidly - and could be made even worse by aggressive new tariff proposals from US President Donald Trump.

"Warning signs have been there for some time," he told . "And Trump's tariff proposals have added an extra layer of uncertainty. We could see inflation rise above 5% if these pressures intensify."

One of the clearest signals of trouble ahead is that so-called core inflation - which strips out volatile food and energy prices - has remained stubbornly high at 3.5%.

"This shows underlying inflation is still well above the Bank's 2% target," said Sentance.

Among the biggest drivers of the inflation spike are:

* Service sector prices, rising at around 5%

* Private sector wages, climbing by 6%

* Soaring utility bills, with Ofgem's new price cap pushing energy costs higher

* Rising food prices, already up from 1.3% to 3.3%, with the British Retail Consortium warning they could hit 5% by year's end

* Eye-watering water charges, up by 26% this year - nearly ten times the inflation rate

Adding fuel to the fire, employers are grappling with a wave of cost hikes, including higher National Insurance contributions and the rise in the National Living Wage - expected to push up labour costs by more than 10% for many firms.

Retailers, care providers and hospitality businesses are expected to pass those increases on to customers in the form of higher prices.

Meanwhile, Sentance warned that further increases in Government spending and borrowing in the upcoming Budget could force the Bank of England to hold back on any further interest rate cuts, despite mounting economic uncertainty.

While a temporary reduction in US tariffs - excluding China - offers a glimmer of hope, Sentance cautioned that "no-one can confidently predict what will happen next" on the global stage.

He argued the Bank of England should "hold fire" on rate changes and brace for a possible inflation surge in the months ahead.