Central Bank: Inflation outlook worsens in UK

The Bank of England, Britain\'s central bank, does not expect the squeeze on household incomes to ease in the short term after admitting the outlook for inflation is worse than expected, documents revealed Wednesday. Minutes from the bank\'s Monetary Policy Committee (MPC) said the rise of oil prices and probable increase in utility bills and food costs meant the rate of inflation would not fall as rapidly as predicted at the time of the Bank\'s August inflation report, the domestic news agency here, the Press Association reported. However, despite the darkened outlook for inflation, the nine-strong panel left the door open for further emergency support as it warned against a \"subdued and uncertain\" outlook and said additional stimulus was more likely than not to be needed, analysts noted. The MPC, chaired by Bank governor Sir Mervyn King, voted unanimously in favour of maintaining interest rates at record lows of 0.5% and keeping the level of quantitative easing, printing money, at 375 billion pounds, following a 50 billion pounds boost last July. The minutes said that despite recent efforts to tackle the eurozone debt crisis, \"very substantial risks were likely to remain for some time to come\". The committee also raised \"the risk of a sharper slowdown in emerging economies\". In light of the weak outlook for growth, the Bank signalled further QE was likely in the months ahead with some economists still backing a further cut in interest rates. Economists said: \"September\'s MPC minutes do little to diminish the prospects of further policy stimulus over the coming months.\" They added: \"We still expect another 50 billion pounds of asset purchases to be announced at November\'s meeting and for QE to ultimately reach 500 billion pounds.\" Meanwhile, the rate of inflation edged down to 2.5% in August from 2.6% in July, official figures revealed yesterday, amid warnings from economists over the rising cost of living. Droughts in the US are likely to mean higher food prices while more energy price hikes are in the pipeline this autumn. Higher university tuition fees here will also add to inflation next month. The Bank, which is tasked with keeping inflation as close to the Government\'s 2% target as possible, previously said the rate would fall throughout 2012 and into 2013. The minutes from the MPC September meeting said: \"The rise in oil prices and the probable increase in utility and some food prices meant that the near-term outlook was for a less rapid fall in inflation than the committee had thought at the time of its August inflation report projections.\" The committee later added: \"The rise in energy prices would mean that the squeeze on real household incomes would not ease further in the short term.\"