Former policy maker Kate Barker said that the Bank of England (BoE) suffered a major setback with its war against inflation, as prices continue on accelerating beyond control.

There's a perception in business as well as in financial markets that the committee has perhaps been behaving in a different way coming out of the crisis and has tolerated inflation more than you might have expected, she said, adding that probably have less belief that it will come back to 2 percent than in the good old days, and that's a sort of modest loss of credibility.

Inflation reached 3.7 percent in December, which is higher than BoE's desired rate of 2.0% and the upper-limit set by the government at 3.0 percent.