A recent poll of investors shows that the vast majority expect interest rates to rise again before the end of the year.
The Bank of England's Monetary Policy Committee (MPC) yesterday voted to keep rates at their current 5.5 per cent level - even though its own forecasts state that inflation will run above the MPC's targeted two per cent unless interest rates rise.
A new survey from Barclays Stockbrokers reveals that 83 per cent of investors expect rates to rise before the year is out - with close to 50 per cent sure that they will climb to six per cent and around 41 per cent claiming they rise to 5.75 per cent.
"At the start of this year, there were hopes that interest rates would peak at 5.5 per cent," Henk Potts, Equity Analyst at Barclays Stockbrokers, commented.
"However, the threat of inflation appears to be more of a risk than was previously envisaged. As a result, there is further pressure on the Monetary Policy Committee to take rates to 5.75 per cent.
"May's Inflation Report was taken by the market to be a fairly hawkish affair. It highlighted that if interest rates were to remain on hold, inflation would fall back to target on a twelve-month view, but the risks to this are very much skewed to the upside.
"While there are a number of base effects that will take inflation lower over the coming months, such as lower domestic gas and electricity bills, the report highlighted concerns that companies are continuing to push through price rises."
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