The governor of the Bank of England has warned that world interest rates may have been too low for too long and that there are bumpier times ahead for the UK economy as a result.

This morning the pound bought 1.8416 US dollars and 1.4649 euros.

Governor Mervyn King said that inflation was "volatile" and the economic outlook "far from certain".

In his speech to business leaders in Edinburgh Mr King said: "During the fastest three-year period of world economic growth for a generation, monetary policy around the world may have been too accommodative.

"Even though the monetary stimulus around the world is now being withdrawn, its effects are still being felt."
Currency dealers will take most note of Mr King's comments on inflation in which he said that rising oil and gas prices were having an effect on household spending.

"Although not of serious concern as yet, the MPC [Monetary Policy Committee] will monitor inflation expectations carefully. Inflation itself remains volatile as increases in oil and natural gas prices pass through to household bills."

The comments have added weight to the argument that the MPC of the bank is planning a rate rise in the near future.