"A rise in CPI annual inflation to or above 3 per cent tomorrow will go some way towards explaining the shock interest rate rise last week. We have said on a number of occasions that inflationary risks are worsening, and our members are signalling that firms expect to raise prices.
"However, even if one acknowledges that last week's MPC decision was on balance necessary, shock tactics are unwelcome and potentially harmful. British business requires a stable and predictable interest rate environment.
"It is vitally important to avoid monetary overkill. In a highly competitive environment firms may not be able to raise prices even if they wish to do so. We continue to believe that, unless there is firm evidence of stronger wage pressures, the MPC should refrain from further tightening. The MPC's own comments suggest that they expect inflation to fall later in the year. It is important not to snuff out a welcome recovery that is still basically fragile."