The UK economy faces a year of stagnant growth, and there is little scope for interest rates to move up or down to counter weak output and high inflation, the Bank of England signalled on Wednesday.

Based on recent market expectations that interest rates would remain roughly unchanged over the next year, inflation would peak around 5 per cent in the next few months and fall slightly below target in the medium term, according to the central projection of the Bank’s latest Inflation Report forecasts.