Inflation to 'fall back on target'
Inflation is likely to fall back to its two per cent target "within a year" after the cost of living hit a 17-month high of 3.7 per cent in April, Bank of England governor Mervyn King said yesterday.
In an open letter to Chancellor George Osborne, Mr King blamed high oil costs, a weaker pound and the rise in VAT to 17.5 per cent for the consumer prices index (CPI) being "somewhat higher than expected" over the past year.
CPI is now almost double the Bank's two per cent target but Mr King said inflation was likely to fall back as these temporary factors fade. But the "pace and extent" of the fall is uncertain and the Bank will monitor developments closely, he added.