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
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.