Bank of England governor forecasts dip in inflation

News Article - 27 June 2008
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The governor of the Bank of England has predicted that inflation in Britain will drop back below the government's target of two per cent.

Mervyn King suggests that the current economic downturn will help to drive down prices and restore some stability within the next year or so, but there will be no rise in living standards as a result.

According to Mr King, it will take some time for the UK economy to stabilise, as banks conduct an "unwinding" of balance sheets and reduce the level of risk they have accumulated.

Speaking to the House of Commons treasury select committee, he suggested that the housing market could face continued problems, but stated that there were no plans to raise or cut interest rates in the short-term.

The current economic slowdown will help to ease price pressures and reduce inflation rates, according to the governor and members of the Bank of England's monetary policy committee.

Mr King suggests that there will be a "one-year pause" in improvements to Britons' overall standard of living as household budgets are forced to accommodate rising food and fuel costs.

Accounting software packages can provide companies with a more accurate picture of their finances during periods of economic slowdown.

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