A sign that interest rates may rise again emerged yesterday as a Bank of England rate-setter said only uncertainty about consumer spending held the Bank back this month.

Kate Barker, known as a "dovish" member of the monetary policy committee for her relaxed views about the need for higher rates, told the Irish Times: "The main reason why we didn't put rates up last time is uncertainty about short-term trends in the economy.

"We would like to see a bit more evidence out of the first quarter and ... a better feel of what's happening with the consumer," she said. But she accepted that the Bank's quarterly inflation report, published last week, forecast inflation rising above its 2% target by 2007 and appeared to make a case for higher rates.

The MPC last raised rates in August, to 4.75%, and the speculation had been that the next move would be down. But signs that the housing market may not be weakening and a pick-up in wage inflation have raised doubts. Markets moved to price in another rate rise, to 5%, in the City yesterday.

Ms Barker said that any rate rise would not be dramatic. "The peak in the cycle may not be very much higher," she said.

Guardian Unlimited © Guardian Newspapers Limited 2005