Three months ago, the Bank saw inflation returning to the target next year. It blamed rising energy bills for a higher than previously expected spike in inflation and warned Britons face hefty rises in their heating costs.
"There is a good chance that inflation will reach 5pc later this year, and it is more likely than not to remain above the 2pc target throughout 2012, boosted by the increase in the standard rate of VAT, higher energy and import prices, and some restoration of companies? profit margins," the Bank said in its report.
?The projection is markedly higher over the first half of the forecast period than in February ... That largely reflects further rises in energy prices and, associated with them, a higher likelihood of substantial increases in domestic utility prices over the next year."
The Bank is assuming that between the coming July and March next year there will be a roughly 15pc rise in domestic gas prices and a 10pc rise in domestic electricity prices.
The Bank also downgraded Britain?s prospects for growth, as expected, blaming ?a delayed recovery in consumption and a less pronounced boost from net exports?. It now sees the UK experiencing an annual growth rate of just under 2.9pc two years from now - lower than the 3.1pc it predicted three months ago.
Governor Mervyn King acknowledged that the Bank had once more had to up its forecasts for inflation and cut the outlook for the UK's growth, but argued that its broad view of the economy had not altered substantially.
?The recent pattern of revisions to the projections over the next year downward to growth and upward to inflation ? has continued,? he said. ?But looking further ahead ... the big picture has not changed much since February.?
Markets were in February pricing in two rate rises by the end of this year, according to the Bank, but since then weaker prospects for growth mean they currently see only one rise coming by December.
Labour seized on the Bank's latest downgrade of Britain's growth prospects as showing that the Government's economic strategy is failing. "We know their reckless policy of cutting too deep and too fast is hurting, but the evidence is growing that it isn?t working," said Angela Eagle, the shadow chief secretary to the Treasury.
However, the Prime Minister's official spokesman said Mr Cameron had stressed in a speech earlier this year that the Government was not in a position to "just flick on the switch of government spending or pump the bubble back up".
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