The Bank of England will raise interest rates in a bid to keep inflation under control, governor Mervyn King has warned.

King acknowledged that inflation was likely to continue rising, with some predicting that energy bills alone would increase by 40% by the end of the year, while growth and house prices were likely to fall. A separate survey by HBOS suggested prices would fall by 9% in 2008 alone.

King warned the Bank of England would do "whatever it takes" to bring inflation down, making interest rate rises over the coming months likely.

He also warned that levels of take-home pay would stagnate for many people, making it difficult to cope with the additional costs.

"It will not be an easy time, and I know that some families will find it particularly difficult," he warned.