U.K. Inflation Rate Falls Most Since at Least 1997 (Update4)

Nov. 18 (Bloomberg) -- The U.K. inflation rate fell more than economists forecast in October, recording the steepest drop in at least 11 years and giving the Bank of England scope to cut interest rates further as the economy slides into a recession. .....................


Central bank Governor Mervyn King said last week that the economy is probably in a recession, and policy makers will cut borrowing costs as low as needed to stave off deflation. The bank forecasts inflation will slow below the government's 1 percent lower limit unless it reduces the benchmark interest rate from the current 3 percent. ...................


King said on Nov. 12 the bank is ``prepared to cut bank rate to whatever level is necessary,'' to keep inflation at the target, and didn't rule out putting the benchmark at zero. The bank's 1.5 percentage point reduction this month was the biggest since 1992.


King also said he wouldn't be surprised if the retail price index fell below zero to reflect cuts in the interest rate. The retail price inflation rate, used in wage negotiations, dropped to 4.2 percent in October from 5 percent the previous month. The decrease was the biggest since January 1993, the statistics office said.