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| Bank chief warns of price rises | Bank chief warns of price rises |
| (20 minutes later) | |
| The UK's inflation rate will rise above 3% in the coming weeks, the governor of the Bank of England, Mervyn King, has predicted. | The UK's inflation rate will rise above 3% in the coming weeks, the governor of the Bank of England, Mervyn King, has predicted. |
| Presenting the Bank's quarterly inflation report, Mr King said the increase in VAT and higher petrol costs would push up prices. | Presenting the Bank's quarterly inflation report, Mr King said the increase in VAT and higher petrol costs would push up prices. |
| But, he added, inflation would then quickly fall back below the 2% target. | But, he added, inflation would then quickly fall back below the 2% target. |
| The governor said that he expected "a gradual recovery" in the UK economy over the coming year. | The governor said that he expected "a gradual recovery" in the UK economy over the coming year. |
| In December the official rate of inflation reached 2.9%. If inflation moves above 3%, the governor is required to write a letter of explanation to the chancellor. | |
| Cautious on growth | |
| But according to the Bank of England's projections, inflation will fall again quickly and could remain below the 2% target for several years. | |
| The Bank remains cautious over the UK's prospects of growth. | |
| "The UK economy has continued to bump along the bottom," Mr King said. "But a gradual recovery in output may now be in prospect." | |
| He added that economic growth was unlikely to return to the levels seen before the economic crisis for "a considerable period". | |
| The Bank's £200bn programme of quantitative easing had helped economic recovery, Mr King said. | |
| Although the programme was paused earlier this month, the governor refused to rule out further injections of liquidity into the economy, arguing that "it was far too soon" to rule out any action. | |
| He did rule out extending the special liquidity scheme, however, which had provided banks with emergency cash at the peak of the financial crisis. |