Bank of England warns inflation could fall less rapidly than expected

The Bank of England sees a worsening outlook for inflation, minutes from its September meeting showed this morning, as the members voted unanimously to keep the base rate at 0.5 per cent.

The central bank said increased oil prices, which rose eight per cent on the month, and the threat of higher food and utility bills meant that inflation would not slow as quickly as previously forecast.

In the medium term, a recent rise in employment twinned with weak output growth also posed a risk of labour market price pressures that could push up the cost of goods and services, the Bank added.

Official inflation figures out yesterday showed that consumer prices inflation fell to 2.5 per cent in August, after a surprise jump to 2.6 per cent in July.

The overall outlook for the economy remained weak, and one of the nine-member Monetary Policy Committee (MPC) said there was a “good case” for quantitative easing to be extended in due course.

However, the rest of the MPC believed the additional £50bn agreed in July, which will run through until November, was sufficient.

The current asset purchase programme total stands at £375bn.