16 Dec

King hints at further base rate action

King hints at further base rate action

Bank of England governor Mervyn King has hinted that there may be more interest rate cuts as inflation continues to fall.

Data from the Office for National Statistics (ONS) revealed today that the consumer prices index (CPI) rate fell by 0.4 per cent to 4.1 per cent last month, influenced mainly by lower oil and domestic fuel prices.

Writing an open letter to the chancellor of the exchequer, Alistair Darling, Mr King warned that the CPI rate may drop below the target level of two per cent by more than the permitted one per cent of variation.

The "substantial risk" of this had led to the decision to cut the rate last month.

Such a situation could prompt further cuts to the base rate to try to push inflation upwards again, with these potentially lowering the cost of mortgages.

Analysts had expected this month's CPI fall to be larger, predicting a 3.9 per cent rate.
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