As economies struggle to stabilise around the world, the Bank of England released its quarterly Inflation Report which has a grim outlook for the financial outlook in the UK. They further project that inflation will rapidly decline in the coming year.

According to Bank Governor Mervyn King, global markets have taken a downswing and the mood is not optimistic. Previously they had expected the economy to bounce back quicker, but it now looks as though the weakness in the markets is likely to persist as inflation will rapidly decrease.

Inflation vs. National Debt

However, the Central Bank stopped one step short of saying that they would begin printing money to ease the struggling economy and rising national debt, “quantitative easing” as it’s called. King went on to say that not only the UK, but the world at large, is up against “headwinds” that he believes are getting “stronger by the day.”

Public as well as private debt is mounting not only in the UK, but there is cause for concern throughout the Eurozone as well as across the ocean in the United States. In fact, on Tuesday the Federal Reserve in the U.S. even made the bold statement that they would most likely keep interest rates near zero at least for the next two years.

Global Inflation Forecast to Stall

Although other countries are freezing rates which will further delay inflation, King did not promise that the Central Bank would be doing the same. Currently they are at a record low, 0.5%, and would likely only see a .25 rise in rates by the end of next year. These statements drove the sterling even lower.

The end result is that the government will need to remain fluid as world economies fight to achieve a healthy balance and a modicum of recovery over this year and the next. In fact, according to one UK economist, the official rates will need to be kept low not only into 2013 but probably even beyond that.