Bank of England sees CPI at 0.5% in 2 years

In the latest Bank of England inflation report the bank sees CPI at 0.5% in 2 years, assuming market rates and risks moderately to the downside. The main downside risk for CPI is recession lasts longer than anticipated, upside risk is effect of sterling on prices.

The bank sees GDP falling by around 4% in early 2009 with some growth seen at end of year and then growth above 3% in 2 years time.

The report will increase expectations of another rate cut next month. Cable has come under heavy pressure, slumping to 1.4360 at writing.