Inflation will probably remain at relatively low levels for the immediate future, according to the governor of the Bank of England.
In the opening remarks of the Inflation Report press conference, Mervyn King predicted that there would be no surges in the rate and suggested he expects to have to write to the chancellor to explain why it has slipped to one percentage point below government targets sometime this year.
“In the medium term, inflation is likely to remain low as the margin of spare capacity that is likely to persist over the forecast period continues to push down on CPI inflation,” he remarked.
Low inflation may mean there are better financial deals around for consumers as the Bank may be prompted to keep the base rate low.
Last week, the Bank’s Monetary Policy Committee, which is chaired by Mr King, voted to keep the UK’s base interest rate at 0.5 per cent.