June 12 (Bloomberg) -- U.K. consumers predicted inflation will reach more than double the Bank of England's 2 percent target in a survey last month, supporting the case for policy makers to consider raising interest rates.

The median forecast on increases in consumer prices for the next year reached 4.3 percent, the highest reading since at least 1999, the central bank said in London today. That compares with the 3.3 percent result in February. GfK NOP conducted the quarterly survey of 2,011 people from May 8 to May 13.

Central bank Governor Mervyn King said this week that the U.K. faces ``a period of rising inflation'' as commodity costs soar. Policy makers, who have cut the benchmark interest rate three times since December, left it at 5 percent this month after inflation reached the government's upper limit, preventing them from making further reductions.

``No central banker can be anything but alarmed by the continuing rise in surveyed inflation expectations,'' Ben Broadbent, an economist at Goldman Sachs Group Inc. in London, wrote in a note late yesterday. ``It would be foolish to rule out higher rates.''

Broadbent changed his forecast for the benchmark interest rate to 4.5 percent by the middle of 2009, up from a previous prediction of 4 percent. He said the central bank won't cut the rate this year.

The inflation rate jumped to 3 percent in April from 2.5 percent, the biggest increase since 2002. Any acceleration will force King to write a letter to Chancellor of the Exchequer Alistair Darling explaining what the bank will do to tame prices.

Current Inflation

Respondents said the current rate of inflation was 4.9 percent, the most since the survey's inception eight years ago, and up from the median 3.9 percent result in February.

Gas prices for U.K. households more than doubled since 2003 to an average 646 pounds ($1,266) a year, while electricity bills are 69 percent higher. The average household now spends 1,058 pounds a year on power and fuel, according to Energywatch.

The central bank's quarterly growth and inflation forecasts published May 14 showed economic growth will slow to a 1 percent annual pace in the first quarter from 3 percent in 2007. King predicted then that inflation may exceed 3 percent for ``several quarters.''

Wage Pressure

The bank is watching wage agreements for signs faster inflation is getting entrenched in the economy. Average earnings excluding bonuses rose an annual 3.9 percent in the three months through April, the most since June 2006, the Office for National Statistics said yesterday.

Rising unemployment may help ease pressure on wages and give the bank room to lower rates further. Yesterday's report showed claims for jobless benefits climbed to a seven-month high in May.

``While inflation expectations are getting pushed up, it's only worrisome if workers demand higher wages,'' said James Knightley, an economist at ING Financial Markets in London. ``With the labor market weakening and wage growth slowing there's no evidence of that,'' he said.

Britons still anticipate the central bank is more likely to raise interest rates than lower them. The bank's survey showed 48 percent anticipate increases in the next year, while 17 percent predicted rate cuts.

Today's report also pointed to deepening dissatisfaction with the central bank among the public. The survey showed net satisfaction with the bank's efforts to set interest rates and control inflation was 22 percent in May, the lowest since at least 1999 and down from 30 percent in February.

The survey ``is bad news, but perhaps repercussions will be limited by the economy growing slower,'' Philip Shaw, chief economist at Investec Securities in London, said in an interview on Bloomberg Television. ``This year we think it will be virtually impossible for the Monetary Policy Committee to ease monetary policy.''

To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net.

Last Updated: June 12, 2008 05:24 EDT