THE Bank of England said inflation will accelerate, breaching the government's 3-percent limit for "several quarters," making it harder for policy makers to cut interest rates as economic growth slows.

The bank said inflation will overshoot its central 2-percent target in two years if it cuts the benchmark rate to 4.5 percent in 2009 as investors predict. The Bank of England this month left the rate at 5 percent, Bloomberg News reported.

Policy makers, led by Governor Mervyn King, are trying to shore up an economy threatened by the worst housing slump in more than a decade and surging food and oil prices. Inflation accelerated to 3 percent in April, the most in more than a year, and any deterioration will require King to write a letter to the government explaining how he plans to bring prices under control.

"The Monetary Policy Committee is facing its most difficult challenge yet," King said after the bank published its quarterly forecasts. "We are traveling along a bumpy road as the economy rebalances. Monetary policy shouldn't try to prevent that adjustment. It must focus on bringing inflation back to the target in the medium term."

The rate on the December interest-rate futures contract rose about 7 basis points to 5.6 percent after the report. British law requires King to write a letter of explanation to the government if inflation strays more than 1 percentage point from the 2 percent target. The governor has only written one letter since the Bank of England gained rate-setting independence in 1997, after inflation reached 3.1 percent in March last year.

"It's going to be extremely difficult to be cutting rates at the same time as writing letters because inflation is so high," said Simon Hayes, a Barclays Capital economist.