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The inflation rate has now remained above the 2% target by one percentage point or more for 12 months, and the Bank of England's governor, Mervyn King, has had to write four letters to the chancellor this year as a result. But with the new government having announced the biggest round of budget cuts since World War II, the Bank still expects the resulting slowdown in spending to bring inflation down over the next two years. However, as the BBC's chief economics correspondent Hugh Pym said, confidence in the Bank's predictions could wane if the New Year heralds more gloomy inflation news.