The Bank has a 2pc inflation target and must write a letter of explanation to the Chancellor if it climbs above 3pc or falls below 1pc. Inflation is 3.1pc, and has been above target for 41 of the past 50 months. Brian Coulton, head of European sovereign ratings at Fitch, said the markets may lose faith in the Bank if it stays above target too long, which would cause a collapse in sterling and force a rate rise. “A monetary policy shock is the biggest risk for a double-dip recession,” he said.