Bank of England reveals true pessimism

The Bank of England has revealed that the hope of further interest rate cuts would not happen due to the inflation threat, as it forecast inflation could reach 4 percent in the months to come.

With homeowners predicting and hoping for lower interest rates, their hopes were dashed by Governor Mervyn King speaking yesterday.

The Chancellor of the Exchequer, Alistair Darling, said that he supported the bank’s decision to protect inflation, and that he is not worried about the soaring food and energy prices.

The governor’s comments also mirror those of the Federal Reserve officials in that inflation is running high, and spiralling.

If the current situation continues and the inflation rated does hit the ceiling rate then the governor will have to draft a further letter explaining the BoE’s intentions, which has not happened since the Bank of England gained rate-setting independence in 1997.

King revealed that the Bank of England has reduced rates in order to cushion the blow to the economy caused by the credit crunch and housing crisis.

The increase in inflation, increased cost of living, credit crisis have meant that Gordon Brown’s popularity is at its lowest since he took over the premiership from Tony Blair.

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