There is a "real chance" the Bank of England will raise interest rates as early as next week, says Skandia, with subsequent hikes pushing rates up to 3% by the end of next year.
Sterling rose to a fresh three-month high versus the dollar this morning after UK services data came in above expectations.
The Bank of England may have to put up interest rates if the commodity price boom continues, deputy governor Charles Bean warns.
The Bank of England topped up Governor Mervyn King's pension pot by £1.4m after deciding to award him an early payout in 2008.
Martin Weale has called for an immediate 0.25% increase in the Bank of England (BoE) base interest rate, echoing the view of Monetary Policy Committee (MPC) hawk Andrew Sentance.
Inflation edged closer towards 4% in December as the rising cost of food and oil products continued to hit the price of goods and services.
M&G's Jim Leaviss says an interest rate rise in the UK could be "GDP suicide", although the Bank of England may still succumb to inflationary pressure.