Mervyn King: Inflation close to peak

The governor of the Bank of England has said inflation is now at, or close to, its peak rate and will fall back "sharply" early next year.

The Office for National Statistics yesterday revealed consumer price index inflation hit 5.2% in September, up from 4.5% the previous month. However, in a speech to the Institute of Directors in Liverpool last night, Mervyn King explained why it would begin to fall and how that was shaping the Bank's policies. He said: "In contrast to headline inflation, domestically generated inflation remains subdued - and on some measures barely above zero. Increases in energy prices, import prices and VAT account for the current high level of inflation. "Once the effect of these temporary facto...