The Bank of England admits that the £400billion quantitative easing programme is now less effective.

Consumer Price Index inflation remained at 2.7% in January. The CPI is the rate prices rise at annually. This is now the fourth month in a row at this rate.

Governor Sir Mervyn King admitted that the near £400billion quantitative easing programme was now less effective but maintained that it is still ready to do more to support the recovery.

The high inflation rate coupled with stagnant growth prompted the Bank of England to predict a difficult road to economic recovery.

The pound slumped in reaction to Sir Mervyn's downbeat take on the economy. This indicates that currency traders believe an interest rate rise would revive enthusiasm for sterling but that this prospect remains distant.