THE Bank of England is expected to leave interest rates unchanged today despite mounting fears over the renewed surge in inflation.

Economists predict the Bank’s Monetary Policy Committee (MPC) will vote 7-2 to hold rates at 0.25 per cent as dovish members continue to outnumber those calling for a hike, even as consumer prices push further past the Bank’s two per cent inflation target.

Official figures on Tuesday showed Consumer Prices Index (CPI) inflation rose by more than expected to 2.9 per cent last month as the effects of the Brexit-hit pound continue to feed through.

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It ended a brief respite seen in June and July, when CPI eased back to 2.6 per cent, and now matches levels seen in May.

Experts believe the MPC will continue to hold off from raising rates to cool rising inflation amid uncertainty caused by Brexit and subdued economic growth, which stood at just 0.3 per cent in the second quarter.

But the increase in the cost of living will likely intensify the debate among MPC members, as inflation continues to outstrip wage growth.

Latest figures from the Office for National Statistics yesterday revealed real pay was 0.4 per cent lower annually – once inflation is taken into account – highlighting the squeeze on household income.

Howard Archer, chief economic adviser at the EY ITEM Club, said it was a “nailed-on certainty” that the MPC will vote to hold rates.

But he added that it will likely reiterate warnings made in its August inflation report that interest rates may rise sooner than financial markets expect.

He said: “The MPC will likely warn that any sustained sterling weakness will increase inflation risks and could prompt an interest rate hike sooner rather than later.

“The MPC may also well warn once again that interest rates are likely to rise earlier and a little faster than markets currently expect and indicate that businesses and consumers need to take this possibility on board.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “We still think that the chances of a rate rise this year are remote. Domestically-generated inflation is subdued, inflation expectations have remained well-anchored and gross domestic product growth is too weak to warrant higher rates.”

Archer added: “We have pencilled in one interest rate hike to 0.50 per cent late on in 2018, but this is far from certain.”