FURTHER interest rate rises cannot be ruled out, Bank of England governor Mervyn King has warned.

The next six to nine months would be "very important" for interest rates, he told the Commons Treasury Committee.

The Bank's rate-setting Monetary Policy Committee (MPC) still expects the official CPI (Consumer Prices Index) measure of inflation to return to the government's target 2.0 per cent over the next two years.

But Mr King warned there was still an "upside" risk that inflation could turn out higher than predicted.

That could mean further hikes in interest rates to curb price pressures.

He expressed concern that there had been some "pick up" in inflation expectations among the financial markets: "That is not a welcome development."

Deputy governor Sir John Gieve said the last 0.25 per cent rate rise in January - which took the official cost of borrowing to 5.25 per cent - had been intended to send a signal that the MPC was determined to keep a lid on prices.

Dorset Business chief executive Peter Scott is warning people to be wary of taking on further debts.

"Consumer debt is running dangerously high, so my advice is minimise further borrowing and cut up your credit cards now," he said.

"For residential mortgages, my view is the smart money borrows before the inevitable Easter hike in property prices."