The Bank of England yesterday signalled interest rates were near their peak, suggesting that only one or two more rises would be needed before the end of next year.

Coming a day after US Federal Reserve raised rates and before the European Central Bank has started tightening, the London-based bank implied its work was almost done.

The Bank has raised its main rate five times since November, most recently last week to 4.75 per cent.

But there are now signs that UK growth is peaking and the surprisingly resilient housing market is finally taking account of the increased cost of borrowing.

The bank yesterday published its quarterly inflation report, forecasting that annualised gross domestic product growth would pick up to about 3.8 per cent in the coming months but slow sharply to 2 per cent by December next year.

This meant inflation, based on market expectations that interest rates would hit 5.25 per cent at the end of next year, would rise to its 2 per cent target within two years and then stay there.

Mr Ciaran Barr at Deutsche Bank said: "The general message is that what is priced into the market produces inflation around target. The Bank is content with the notion that they raise rates once, possibly twice more in this cycle." The pound remained at a one-month low against the euro yesterday, reflecting the market's view that the report was dovish.