Britain will raise interest rates sooner than expected and definitely before the end of the year, according to the world's leading economic think-tank.

The Organisation for Economic Co-operation and Development (OECD) said that with inflation still above the Bank of England's 2% target the rise in rates is unavoidable.

Rates will need to be as high as 3.5% by the end of 2011, the OECD said - seven times the current 0.5% at which the Bank has maintained its base rate since March of last year.

"The gradual drift up of some measures of inflation expectations implies a need to increase interest rates earlier than previously thought and no later than the last quarter of 2010," said the think-tank.

The OECD's warning is the strongest suggestion yet that inflation - which hit 3.7% in April - may not come back within the Bank's target range as quickly as the Monetary Policy Committee has suggested.