The Confederation of British Industry (CBI) raised UK inflation forecasts for 2011 to 3.9% average from 3.3% estimated in December, yet it expects to reach the BoE's target of 2% by 2012.

CBI expects the inflationary pressures to prompt policy makers to raise interest rate in the second quarter.

On the other hand, it lowered 2011 and 2012 growth projections to 1.8% and 2.3% respectively from 2% and 2.4% estimated in December, yet it does not expect the economy to fall in a double-dip recession.