The Bank of England is often said to be walking a tightrope, at risk of a precipitous fall into inflation on one side and recession on the other. But it is also possible to fall with one leg on either side of the rope – and that hurts too. New data suggest that Britain has an inflation problem and that, even though the economy is weakening, the Bank must delay interest rate cuts until it can be confident that the slowdown is sufficient to cool price rises.

The inflation data were bad. Consumer prices rose by 3 per cent in the year to April, a full percentage point above the Bank’s 2 per cent target, while the price of goods leaving factories rose by 6.2 per cent in the year to March. Much of that is because of higher commodity prices and falls in sterling, which cause import prices to go up, but there were also worrying signs of core domestic inflation. Service prices rose by 3.7 per cent over the year.

The growth data were also bad. Shop sales grew slowly; housing transactions fell to record lows, which hurts builders, estate agents, and a swath of retail activity related to fitting out homes; measures of consumer and business confidence are poor. Yet given the scale of the credit squeeze, it is a surprise that the economy is not weaker, while the fall in sterling against the euro will stimulate export trade.

The calculations for the Bank are difficult. Inflation will get worse before it gets better: still more expensive oil, still cheaper sterling and price rises already in the pipeline make sure of that. But most of these effects are one-off. Consumer prices should adjust to the new level of the pound and the oil price, then stabilise.

The trouble is that average UK inflation has been above target for three years, and will probably be above target for at least two more. Who, given that record, will believe that the price rises are one-off? Not British consumers, who now expect inflation to be 3.8 per cent over the next year and may demand higher wages to match. It is those expectations that the Bank must control.

A weaker economy will reduce the pressure on prices, but the scale of the slowdown is unpredictable. Tight credit conditions may weaken the economy so much that unless rates are cut, inflation could fall below target – but given the danger of runaway price rises, the Bank will have to take that risk. Interest rates should not be cut next month, but kept on hold until the autumn, to await more evidence on how far the economy will slow. A period of poor growth at the same time as high inflation will hurt: but it is better than a plunge off the tightrope to either side.