Bank of England governor 'expresses confidence'

Date: 27th June 2008

The governor of the Bank of England Mervyn King has expressed confidence in the future direction of inflation in the UK.

In spite of current levels of 3.3 per cent, Mr King has confirmed his belief that inflation will move downwards, returning again to a rate of two per cent.

However, in news that could be problematic for small businesses, Mr King noted that inflation is likely to rise above four per cent before again moving downwards.

"As things stand, inflation is likely to rise sharply in the second half of the year, to above four per cent," said Mr King earlier this week.

"I must stress however, that there are considerable uncertainties, in both directions, around this and any such projection is particularly sensitive to changes."

Mr King has confirmed that in addition to the cost of energy, inflation will probably be affected by rises in the cost of food.