King issues reassurance over inflation

Inflation should return to the Bank of England’s target despite the recent jump, governor Mervyn King has stated.

Speaking at the University of Exeter, Mr King issued a reassurance that inflation will not continue to increase, noting that although consumer prices index (CPI) inflation will edge over three per cent ’for a while’, it ’should return to [the two per cent] target in the medium term’.

He was commenting after figures were released showing CPI inflation rose from 1.9 per cent in November to 2.9 per cent in December - the largest climb ever recorded in the annual rate.

Mr King added that isolated factors were the reason behind the jump in inflation and praised the monetary policy committee’s quantitative easing programme, stating that the move ’averted a potentially disastrous monetary squeeze’.

Currencies Direct analyst Phil McHugh yesterday called for the Bank to end quantitative easing next month following the increase in CPI inflation.ADNFCR-2318-ID-19570263-ADNFCR