Inflation 'set to drop below 1%'

Bank of England chief also downgraded UK growth forecast for next year

Updated: 
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The Bank of England has trimmed its UK growth forecast and predicted inflation will fall below 1% over the next six months.

Projections in the Bank's quarterly inflation report are likely to cement expectations that interest rates will not rise until well into next year.

Governor Mark Carney also sounded a grim warning about the threat from the ailing eurozone economy, adding: "A spectre is haunting Europe - the spectre of economic stagnation, with growth disappointing again and confidence falling back."

He said it was more likely than not that he would have to write to the Chancellor in the next six months to explain why inflation had fallen below 1%.

The Bank also cut its UK gross domestic product (GDP) forecast for next year from 3% to 2.9%, although it still expects 3.5% growth for this year.


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