The Bank of England’s quarterly inflation report shows that in the coming months it is possible that the UK Inflation Rate Could Rise Above 3%. At forex markets across the globe the British Pound fell broadly following the Bank of England’s inflation forecasts, with both the US dollar and the euro advancing against the pound.

The governor of the Bank of England, Mervyn King, predicted a sharp rise in UK inflation due to the increase in VAT and higher petrol costs, when he presented the bank’s quarterly inflation report. However, he added that inflation should then fall back below the 2% target within a short period which he predicted would then remain below the 2% target for several years.

Forex traders at foreign exchange trading companies such as HY Markets saw the pound fall by 0.8% against the US dollar, falling to $1.5579 and the pound also lost ground against its European counterpart. The euro rose 0.4% to 88.10 pence in the wake of the Bank of England’s figures.

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