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Bank governor signals rate hold

The Bank of England seems unlikely to raise rates, following comments made to MPs by its governor.Addressing the Treasury Select Committee yesterday, Mervyn King said that it was a priority for the Bank not to exacerbate the UK's current economic slowdown - a situation that might be worsened by any increase in the base rate of interest.Analysts have speculated that the Bank might make the move due to rising prices - as rate rises can have a deflationary effect.Overall inflation stood at 3.3 per cent last month, according to the government - a full 1.3 per cent above its own target.Mr King commented: "The economic slowdown will need to be sufficient to ensure that inflation does not persist above the target."But at the same time, we need to avoid a slowdown that is so pronounced that it would pull inflation down, not just to the target, but below."

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