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16/12/2008
Inflation Could Fall Below 1%, Says King
Banking boss Mervyn King has told the government UK inflation levels could drop below one per cent next year.
Mr King made his prediction in a letter detailing the reasons for prices doubling more than official targets.
Last month inflation eased 4.1 following a rate of 4.5% in October.
Both these rates were well above the government's two per cent target.
Mr King was asked to explain what action the Bank of England was planning to correct the fluctuation.
Mr King responded to calls, suggesting a sharp fall could occur next year, creating a substantial risk that the rate could fall well below targets for next year.
Writing to the Chancellor Alistair Darling, Mr King said: "It is possible that I will not need to write a further open letter to you in three months time.
"Indeed, given the short term outlook for inflation, it is quite possible that I will next need to write to you to explain why inflation has deviated by more than one percentage point below the target in 2009."
According to Mr King, the outlook for activity had deteriorated since the bank's November forecasts.
However, he suggested the fall in sterling and market interest rates should support the outlook for activity and inflation.
(PR/JM)
Mr King made his prediction in a letter detailing the reasons for prices doubling more than official targets.
Last month inflation eased 4.1 following a rate of 4.5% in October.
Both these rates were well above the government's two per cent target.
Mr King was asked to explain what action the Bank of England was planning to correct the fluctuation.
Mr King responded to calls, suggesting a sharp fall could occur next year, creating a substantial risk that the rate could fall well below targets for next year.
Writing to the Chancellor Alistair Darling, Mr King said: "It is possible that I will not need to write a further open letter to you in three months time.
"Indeed, given the short term outlook for inflation, it is quite possible that I will next need to write to you to explain why inflation has deviated by more than one percentage point below the target in 2009."
According to Mr King, the outlook for activity had deteriorated since the bank's November forecasts.
However, he suggested the fall in sterling and market interest rates should support the outlook for activity and inflation.
(PR/JM)
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