The Bank of England could raise rates by as much as 0.5% at its next rates meeting - the biggest single jump in 27 years.
Andrew Bailey, the Bank's Governor, said such a move is "not locked in" in a speech to City leaders last night.
Data due out today is expected to show June's inflation picked up from May's 40-year-high of 9.1%.
The Bank is tasked with trying to wrestle that figure back down to 2%.
Mr Bailey said in a speech at Mansion House that a 50 basis point rise - from 1.25% to 1.75% - will be one of the options for the Monetary Policy Committee when it next decides on rates on 4 August.
"At the MPC's last meeting we adopted language which made clear that if we see signs of greater persistence of inflation, and price and wage setting would be such signs, we will have to act forcefully," he said.
"In simple terms this means that a 50 basis point increase will be among the choices on the table when we next meet."
The Bank’s Monetary Policy Committee has already voted for five back-to-back rises after inflation hit a 40-year high of 9.1%, taking the base rate from 0.1% to a post-financial crisis high of 1.25%.
A 50 basis point jump would add almost £70 to month to a the costs of a typical £250,000 mortgage on the average five-year rate, according to data from Moneyfacts.
FTSE 100
The UK's top share index, the FTSE 100, was up 30 points at 7,326 shortly after opening this morning, following yesterday's 73-point rise.
Companies reporting today
- Royal Mail - Q1 Trading Statement
- Tesla - Q2 Results