Bank of England believe Inflation will jump to 3% then fall again

The Bank of England Governor Mervyn King said in his latest quarterly inflation report on Wednesday that inflation will likely jump to more than 3% in January due to temporary factors, however will fall back below the 2% target.

It is believed that Inflation would stand well below the two percent target in two years only if interest rates rose as fast as markets predict, Bank of England forecast showed on Wednesday. The Bank report showed the economy recovering very slowly.Due to the election in May most analysts expect greater fiscal consolidation whoever wins that contest.

The BoE have also frozen its 200 billion quantitative easing programme.. The report will however boost home owners that interest rates will need to stay low for longer than many analysts currently predict, and may well stay low for the year ahead.

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