Rate cuts unlikely to be forthcoming this year

The governor of the Bank of England, Mervyn King, has indicated that future base rate cuts for the remainder of this year may have to be put on hold, after it was announced that inflation levels have soared out of control, going way above the government’s 2% inflation target.

King made the announcement after he was forced to write to the Chancellor, Alistair Darling, to explain why inflation had soared to such a high level, and to explain what was going to be done to try and reduce the level of inflation. This was when the rate of inflation soared to 3.3% but since then it has increased to 3.8%.

King said that he was aware of the problems facing the economy, but said that the central bank would have to take whatever action was necessary to bring the level of inflation back down. He said: ‘The economic slowdown will need to be sufficient to ensure that inflation does not persist above the target.’

He also went on to state: ‘But at the same time, we need to avoid a slowdown that is so pronounced that it would pull inflation down, not just to the target, but below.’ But a Tory party official was not best pleased about this action, and he said: ‘You are paid to keep inflation under control, not to write letters!’

An economist said that interest rates could even end up rising as a result of the situation, stating: ‘What is apparent from the testimonies, is that if the Bank of England does change interest rates in the near term, it will be to raise them.’