Mervyn King: recovery is ‘unlikely to be smooth’

The economy's recovery is "unlikely to be smooth" according to the governor of the Bank of England, Mervyn King. He predicted that inflation would rise steeply in the first half of 2011, and start to fall again next year.

With the release of the Bank's inflation report today, King said inflation would start to fall once pressure from high commodity prices eased up. He pointed out, however, that this could go both under and over the Bank's target of two per cent, and that "there are large risks in both directions".

King has been forced to write to Chancellor George Osborne to explain why the CPI inflation rate of four per cent was twice the desired target.

There is split opinion on the idea of raising the interest rates to tackle inflation. Two members of the Bank's Monetary Policy Committee have voted for it, whilst others, including King, maintain that a rate rise would further upset Britain's still unstable economy.

Read a full report at BBC News. ·