He said in his last open letter to the Chancellor that inflation would drop. So his 'independent' committee have been most definitely asleep at the wheel. I think we should expect Mr King's resignation letter - after all that's what everyone else gets when they miss targets due to complacency.

paul, London, UK

The "nice" decade was fuelled by irresponsible borrowing to spend by households and government alike. The underlying damage that this action caused was masked by north sea oil revenues and the "China effect". The cure is to reduce borrowing. The banks have become rational. Will the government?

Steve, London,

Intrest rates at 7% sometime soon...and maybe higher!!

Jamesg, shanghai, china

The BoE need to raise the bank rate, otherwise they are subsidising banks with cheap taxpayer money. The banks are divesting out of the UK and this will accelerate if there is no real return on investments. Individuals will do the same and that will lead to a sterling crisis.

Steve Marchant, Broadhempston, UK

As Gordon Brown said, he's, "brought an end to boom and bust.," so what is everyone so worried about?

John, Aberystwyth, Wales

The main reason for all our problems is confidence. Economic confidence. The BoE needs to start thinking before acting. Dropping interest rates will be drastic. 'Real' Inflation has been running at this rate for at least three years. The government further fuels this by increasing fuel tax

Andrew, Wigan,

The last 10 years have been built on "funny money".
The banks knew there was a fast buck to be made by lending to low earners and selling on the debt. They knew the bubble would burst but the profits were just too desirable.
A slow down and recession is what the country needs to restore balance.

Kris, London,

Martin,
You are very right which is why it is safe to say that a big state and socialism in general doesn't work. They tax and spend until we bleed and then things turn sour, they can't tax anymore, so they borrow and run up the deficit. It is a vicious cycle that Labour has always done.

James, London, England

Hector of Amersham, you are right - the government should reduce fuel tax. But massive public sector spending commitments mean they have no room for manoeuvre - a fuel tax reduction would need to be paid for by even more public sector borrowing, which is inflationary.

Martin, Newmarket, Suffolk

We are heading for an economic slowdown with or without inflation; better without, so the base rate should be raised as soon as possible to strengthen Sterling in order to maintain the value of earnings. Allowing inflation to eat away at earnings will push the country even deeper into the mire.

Paul, Coventry,

Britain has a lot of remedies . One of them is to join the Euro Zone and adopt the Euro as its currency. There is always a choice.

Karin Scherrer, Zurich,

And I've just watched a Rangers supporter on TV who has paid £7000 for seven tickets for tonights match. A bit of hunger might restore sanity to this depraved country.

eric cmapbell, harrogate, uk

I suppose Govt ministers & MPs will increase their salaries to match real inflation & "sod" the rest of you.

Vic Cedar, Scottsdale, Arizona, USA

During '2007 many shrewd people commented in the Times that bad times were ahead. I myself - having friends deeply embedded in the financial sector - said that the stupid and lying analyses by Bronn and Co. were leading us into an economic disaster. We do'nt produce what the world wants,

John P, Westcliff on sea, United Kingdom

Using the Mervyn indicator we are past the worst, his prediction of a recession is only 9 months late. How do these clowns justify a salary? Like Bernanke he could have dropped rates to 2% and the recession would two thirds done with no dire effect on the property market.

Will, Lincoln, UK

And I was under the impression that the era of "boom and bust" was over...

Dan, Winchester, UK

Why on earth did the BoE reduce interest rates in the first place? It was panic. Sterling has fallen against the euro by almost 18% since August mainly due to rate cuts. This has exacerbated our inflation problem. Now is the time to pay for the low rate years of the past before we have a BIG problem

pedro tam, london, UK

Further oil shocks on their way. Saudi Ghawar field is dry just pumping sea water now. $1000/ Barrel in ten years a certainty.

King is helpless. No interest rate level can curb the energy inflation.
Labour's parting gift will be to organise free food and lodgings for the poor and old.

neils, Billericay, U.K.

The property market is distressed with particular regard to residential properties. There is little evidence as people are loathed to sell at a loss but it would appear that prices are falling substantially. Recent auction sales reveal prices closer to 2004 levels.

John, Manchester, UK

We are now seeing asset price deflation. There is less money about, and there will be even less as staple prices increase. We won't see true inflation, with its debt relief, until there's a cost push from wage/benefit demands. The govt cannot boost demand because of sterling. The outlook is dire.

John, London, SE,

If GDP growth is predicted to be 1% at 5% interest rates..expect GDP growth to go negative (recession) when interest rates go back to 6%+ to bring inflation under control..

No one understands why we are getting inflation..Its about time i wrote a paper on it...watch this space..

des, birmingham, uk

Tris of Dundee

Remind me: Blair, Brown Darling - English? Certainly not. England's only salvation is to free itself of the Scottish fools who have done so much to harm it.

Richard, Cambridge, England

"releasing untapped potential" What is it ? Sale what is left of us in Dubai?

Nick, the OPPOSITE is MISERY. They are not going to reduce the prices of houses. They will keep it closed, the will rent it to those that have no choise or they will sale it to the super rich or to the stupid.

Fabio C, London, UK

I'll believe we are in a recession when I see those derelic victorian houses been sold for £50.000 Until them, the economy is doing just fine.

Fabio C, London, UK

if you think the U.S. housing market is bad just wait till the UK gets hit. the average home price in the UK is 8 times average earnings while in the U.S. it is only 4 times...we have a rocky road ahead.

Alex, London, England

"A hA! So stagflation is NOT a keynesian desease.. " Rui, Lisbon, Portugal

But the present UK government is Keynesian. They've deliberately attempted to inflate the economy through a massive expansion of state spending, and used job creation in the public sector to disguise unemployment.

Godfrey Wind, Kent, UK

Ok government don't like RPI inflation so they invent CPI inflation and link it to pensions etc. That's getting a bit high now too, wonder what measure they'll think of next to link pensions too? Probably they'll swap to HPI (House price inflation) whilst it suits them!

Chris, Lichfield,

Brown's "miracle"of low inflation was largely due to cheap Far east imports, which hid the rise in costs of everything else. Far east inflation and the devaluation of the pound, (which Broon never mentions) has ended that. His jibe about high inflation under the Tories will get up and bite him soon.

KW, Bognor Regis, England

The value of our properties TODAY is DIRECTLY linked to the amount of money banks and building societies are willing to lend to an individual or couple. If the income multiples go up from 3x salary to 5or6x salary then the amount an borrower can PAY for a house inceases accordingly. The OPPOSITE is?

Nick, London, UK

The official view of inflation is touchingly naive.

But then Merv King probably doesn't actually get out of the car to pay for his own petrol or groceries.

Meanwhile people consider hoarding rice to stave off a difficult year ahead.

(the Blair decade: an amusing illusion)

Dan, London, UK

Jack Jones, Interlaken, Switzerland.

Yes, unfortunately England will take Scotland, Wales and Northern Ireland with it.... unless we can get free first.

Anyway, it's a pity I slept through that nice decade. It might have been fun.

tris, Dundee, Scotland

At last mervyn king has shown some leadership but is too late?why did he cut rates 3 times since christmas?
was he told to try to reflate the housing bubble?
Intrest rates should rise to protect sterling,it,s too late to be playing political games of gordon browns making.
Infation affectseveryone

bob, hants,

The nice decade, three trillion pound of personnel debt. What was nice about that Mervyn?

steve tea, manchester, cheshire

Whilst here in the real world inflation is fast approaching 10%+.

David Leslie, Perth, Scotland

A hA! So stagflation is NOT a keynesian desease.. it can happen in a neo-classic environment too.

Talk of a tiger by the tail...

Rui, Lisbon, Portugal

"The Bank of England also said that there is a risk that GDP could fall below zero"........now that would be bad.........I think he must have said growth in GDP....:-)

dudley holley, Thorpe Bay, UK

"...a risk that GDP could fall below zero..."

So sloppy...I think you mean GDP growth.

Neil McF, Southampton, England

Good luck.
In 11 months I'll be long gone from this New England.
You're welcome to it

Phill, The Wirral, England

Therefore the unecessary recent rate cuts should be reversed and asap otherwise even more and bigger pain later on...

cww, suffolk,

Why is it "Good news" that inflation hasn't fed through to wages? Cost of living goes up 5% and your salary goes up 5% is not a good thing! It's not all about mortage costs and interest rate cuts.

Jim Henderson, Wimbledon, UK

What nice decade? Maybe it was nice for him and his friends but what a bout the rest of us?

Dave, Harlow, UK

Can anyone please tell me how screwed we all are?

lmr, london,

I'm already saving so I can pay my gas and electricity :)

Dave, Harlow, UK

I should just like to know, why, despite all the indisputable evidence to the contrary, the government and the BOE seem to regard the CPI as representative of the rate of annual price rises to the average consumer. Is it, perhaps, political?

Richard, Alicante, Spain

I suppose the people here saying 'put the interest rates up' already have their home paid for!

Dave, Harlow, UK

The higher cost of the basic food stuffs and the rising cost of fuel. It's these two things which sooner or later are passed on to the consumer and this pushes up inflation. Added to this is the interest rate, lenders don't pass on cuts because of the high "libor" costs.

A grim recipe...

C. Hale, Worcester,

It was obvious it wasn't going to last.2007 will probably become known as the year that the Golden Age ended.It was easy keeping inflation low with a stong pound and easy credit.You could hide it in house price inflation.Now we are going to experience the exact opposite.High inflation,no easy credit

stephen hulton, eure, france

Nice decade over! - this may be the turning point for UK plc as a whole i.e. the best is behind us for good! Although the handling of the economy is now more complex and risky than ever, keeping rates at 5% for the rest of this year while prices rise will mean the economy will crash

Rob, Melksham, UK

A year ago we went into a negative balance of payments for the first time in history - including invisables. I think it was Jackie Smith on News night explained it was not the same as personal finances! - No need to worry - That is the problem the Government does not understand the basics.
Phil

Phil Pickervance, Denton Manchester, Great Britain

What is so awful about house prices falling? If property is cheaper then more young people will be able to afford buying a house or flat without being in too much debt.

Simon Hall, Northampton, England

We will soon be seeing the elderly in financial distress. Real inflation is well over 4% and has been for a time. Monthly numbers or annual numbers do not tell the story of how inflation has permanently destroyed the puchasing power of those on fixed incomes/pensions, in just a few short years.

John P-T, Reigate,

King and Darling are still deluding themselves that GDP will grow this year and next. It won't - and they're responsible, they demonstrated they knew what to do with Northern Rock (nothing) but chickened out, revealing that they lacked backbone and would buckle under pressure. Both need sacking.

Noel Falconer MEcon, Couiza, France

"The Bank of England said 5 per cent rates risked GDP falling to zero at the end of this year and into next." I think you missed "growth" out of this statement. Zero GDP is a pessimistic outlook indeed!

Peter S, London,

Genuine question, perhaps somebody here could answer:

If inflation is so driven by fuel price increases why don't the government simply reduce fuel tax. This would reduce inflation would it not? Virtually everybody would feel richer

I don't know much about economics so maybe it's a dumb idea

Hector, Amersham, UK

The FSA and SEC need to investigate price manipulation and hot money in the oil market. Crude prices affect the $. Commodities are rising as they are priced in $ - increased prices impact inflation and interest rates. If the scurge of manipulation in the oil mkt is dealt with markets can recover.

Will, Lincoln, UK

There has to be re-adjustment, didn't anybody realise that we could not go on spending as if there was no tomorrow?
Unfortunarely, the invoices generated from reckless lending and borrowing must now be settled.
It could be very painful...

Graham , Littlehampton,

GDP to fall to zero?

Now that's what I call a gloomy prognosis.......

Sean , London,

Everybody knows real inflation is already touching double figures.

Recently i read a headline 'Cost of Living at 4x Inflation' (?!?), and we all know about the massive money supply increase driven by the property bubble and its implosion.

Come on, people, join the dots...

David Hall, Stafford, UK

3 or 4% inflation huh! What planet is this man from? No wonder we are in a mess if he believes this rubbish.
China (YES, it does matter -less cheap imports folks) has just hit 10% and the reality is that we have been there for some months now and rising. Raise interest rates 2% NOW.
Savers/Pound.

Richard 757, Cricklewood,

Does that mean that the State pension is going up substantially?

B J Deller, Marbella, Spain

House prices have support from a structural shortage of housing and the land and inclination to build more; plus secular trends i.e fewer people living under one roof and a rising population. In 10 years time, people will wish they had taken advantage of this short term fall in prices.

Pete, London,

You can see where this is going..

Rates kept artificially low to balance the risk of low growth and inflation (i.e. gambling the economy for political gain)

Inflation will explode and finally the BoE will be forced to rise to 15% to prevent total collapse. House prices drop 50% or more.

A Harris, Kettering, UK

5% interest rate, less 20% tax = 4%. Official inflation rate 4%, result no interest whatsoever. And that is assuming the official rate was anywhere near the real annual increase in living costs for real human beings which it isn't.

Richard, Alicante, Spain

I am intrigued by the idea of zero GDP "The Bank of England said 5 per cent rates risked GDP falling to zero at the end of this year and into next.", not sure I would like to be in a country with zero GDP - i wonder if "growth" is missing somewhere.

Malcolm, Cambridge, UK

Good news then - lower house prices mean we can start spending more on interesting stuff and boost the economy.

Rich, Guildford, UK

People must stop spending and start saving. We've grown too used to easy money and big debt. It's time to start paying off the debts we've acquired over the last decade. The Bank should keep interest rates high. Encourage people to be more frugal. That's good for the economy, public and environment.

Jake Brumby, Oxford, UK

The average cost of living to the average family is rising every day. Would be nice if the government would come clean with the real price of lnflation so int rates could be adjusted to suit,get the house price bubble burst and get the economy back on track .Pain for some but its to late now, sorry!

john, elgin,

Hate to say it but I think England is going to suffer an enormous hangover figuratively and literally. Hanging on financial services alone as the sole competitive advantage isn't a smart strategy. One of these days, the owners of all that digital money's going to want it back.

Jack Jones, Interlaken, Switzerland