Bank forecast to raise rates above 5% as UK inflation falls by less than expected

Rate drops to 8.7% but food price rises remain close to 45-year high

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Borrowers have been warned to brace for Bank of England interest rates above 5% before the end of the year, after an unrelenting rise in the cost of food meant UK inflation dropped by less than expected last month.

Raising the prospect of additional financial pain for millions of borrowers and mortgage holders across Britain, economists warned the UK economy was facing stubbornly high levels of inflation that would draw an almost guaranteed reaction from the central bank.