Ernst & Young LLP's Item Club said BoE policy makers should not rush in raising borrowing cost to stem inflation, which is expected to hover around 4% this year with the rise in oil prices and increase in VAT to 20.0% from 17.5%, until they make sure the economy is on the right track toward recovery.

The Item Club raised growth forecasts for the current year to 2.3% from 2.2% while it slashed its anticipations for 2012 to 2.8% from 2.9%, where it expects exports and investment to uplift recovery and inflation to retreat.