The Bank of England has kept an inflation target of 2% in its sights - providing a signal that interest rates may remain on hold.

A key BoE report on the UK economy indicated the Consumer Prices Index (CPI) will be around 2% at the end of a two year forecast period, prompting Governor Mervyn King to comment that it was "perfectly reasonable" to look at this and conclude that to leave rates on hold was a "reasonable outcome".

Forecasts from the Bank anticipated the economy growing a little less than expected in the short term before picking up again.