The Governor of the Bank of England joined the criticism of European energy markets yesterday and warned that gas prices would stay volatile for at least another year.

Appearing before the Treasury Committee, Mervyn King said efforts to secure gas supplies for the UK were being frustrated by a lack of competition on the Continent.

This has led to lower than expected levels of gas passing through the interconnector pipeline between Belgium and Norfolk, Mr King said, while the UK's biggest gas storage facility had been damaged by fire.

Energy suppliers, including British Gas, had responded by pushing up household bills substantially above the rate of increase in consumer prices since the bank published its inflation report in February.

Mr King said: "The increases in gas prices which were announced recently are likely to push inflation over the target in the short-term, and erode the purchasing power of household incomes, thus slowing the growth of consumer spending."

High energy prices have been a key reason why the bank's Monetary Policy Committee has kept interest rates unchanged at 4.5 per cent since August despite calls for a cut by unions and manufacturers.