LONDON (AP) — British Treasury chief Alistair Darling warned against hefty pay rises that could fuel inflation as it was revealed yesterday that the Bank of England considered raising interest rates last month to temper already surging prices.

Darling said that the creation of a wages-prices spiral would be "disastrous" for Britain as he acknowledged that the country was facing a "difficult year".

Britain's inflation rate has risen from 2.1 percent at the start of the year to 3.3 percent in May as global demand for food and oil has increased domestic prices for meat, vegetables and fuel.

However, Darling said it would be a mistake for workers to try to compensate for higher living costs by pushing for big pay awards.

"Inflationary pay rises would be disastrous not just for the country but for each and every one of us," he told British Broadcasting Corp. radio. "We cannot allow inflation to become embedded in this country as we allowed it in the 1970s, 80s and 90s."

Prime Minister Gordon Brown announced on Tuesday that government ministers would forego their annual pay rise to set an example.

Fears of a wage-price spiral have been fuelled by an inflation-busting pay deal agreed with tanker drivers from Shell that ended a four-day strike on Tuesday. Members of the Unite union are due to vote soon on an offer that is worth around 14 percent over two years.

"I think the particular problems in relation to this tanker dispute are peculiar to this," Darling said, playing down the significance of the deal. "Settlements overall over the last 12 months are around three and a half percent which is consistent with our inflation target."

However, inflation is now more than a full point above the government's target of two percent, leading to speculation that the Bank of England will raise interest rates from the current five percent to restrain consumer demand and bring down prices.

Minutes of the bank's June meeting released yesterday showed that some of the monetary policy committee's nine members felt that recent upward price pressure "had been sufficient to consider whether an immediate rise in bank rate was warranted".

The minutes of the meeting, held two weeks ago, added that "if there were a serious threat to medium-term inflation expectations then a pre-emptive rise in rates would be appropriate. Delay would only increase the eventual costs of bringing inflation back to target."

However, the committee eventually voted 8-1 to keep rates unchanged amid considerations that medium-term inflation expectations remained "anchored" and that a hike could prove counterproductive.

The dissenting member, US-based David Blanchflower, voted for a quarter of a percentage point cut, as he did in May.

Governor Mervyn King tempered some of the speculation about a rate rise in the near term on Tuesday in an open letter.

"The committee believes that, if the bank rate were set to bring inflation back to the target within the next 12 months, the result would be unnecessary volatility in output and employment," King said in the letter of explanation he is required to write when inflation moves more than a point above the target.

The bank has a difficult path to tread in coming months as it contends with both rising inflation — King forecast it would increase to 4 percent before the end of the year — and slowing economic growth.

Darling said that while he accepted that growth would slow this year, there were "very good reasons to be optimistic" about the outlook for the economy.

The government has predicted that the domestic economy will grow by between 1.75 percent and 2.25 percent this year and by between 2.5 percent and 3 percent next year. However, many economists believe that is optimistic, pegging growth this year at closer to 1.3 percent.