Azerbaijan, Baku, 14 May / corr. Trend A. Badalova/ The rise in the inflation rates restricts the drop in the interest rates, Merwyn King, the head of the Bank of England said on the Bloomberg TV channel on 14 May in the quarterly report on inflation of the Bank.
"It is a high time to change the interest rate. High inflation rates restrict the management of the bank from decreasing interest rates," he said.
In its last meeting with the European Central Bank, the Bank of England did not make changes to the interest rates retaining it at previous 5% annually. In December, the Bank decreased the interest rate by three times. The interest rate was decreased last time by 0.25% in April 2008, in order to prevent the threat of inflation.
The target level of inflation established by the bank is 2%. According to King, the Bank can not further lower the interest rate due to fear of increase in the inflation rate more than the target level. According to King, if the basic interest rate is lowered up to 4.5% annually in 2009, the inflation will be higher than the target level of the Bank of England.
According to King, the risk of rise in the inflation rate will increase in the short-term perspective. The Bank forecasts inflation to rise more than three times during several quarters.
As to the growth rate of the real estate market, King stated that the fall in growth rate of the market is not strong in the Great Britain as compared to the United States. The Bank forecast general fall in the real estate prices.
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