Governor Mark Carney has said people should 'enjoy the low inflation while it lasts' as the Bank of England will bring inflation up to the 2% target by the end of the year.
We expect inflation to be very low over the next few months. But over the course of the year as we get towards the end inflation should start to pick up towards our 2% target.
The British people should enjoy this period of very low energy prices low, very low food prices, enjoy it while it lasts.
An referendum on the UK's membership of the European Union should take place "as soon as necessary", the Bank of England governor has said.
Mark Carney said businesses are continuing to invest and hire despite political uncertainty connected to either the recent election or future referendum but added that: "It's in the interests of everybody that there is clarity about the process and the question and the decision."
The Conservatives have pledged to have a vote on the issue before the end of 2017. Asked if the referendum had resulted in uncertainty among business bosses, Mr Carney told BBC Radio 4's Today programme:
We talk to a lot of bosses and there has been an awareness of some of this political uncertainty - whether because of the election or because of the referendum.
What they've been telling us, and we see it in the statistics, is they have not yet acted on that uncertainty - or to put it another way, they are continuing to invest, they are continuing to hire.
Asked why productivity has not therefore increased, Mr Carney said: "It should start to move up.
"One of the big advantages this economy has is access to the European market. It's the largest economy in the world, it's our largest per destination, it's our largest investor in the United Kingdom."
Asked if he meant he would like to see the referendum sooner rather than later, Mr Carney said: "As soon as necessary. That's as much as you're going to get."
The Bank of England governor Mark Carney said interest rates could be cut further, and the £375 billion quantitative easing programme expanded if low inflation continues for longer than expected.
Mark Carney's comments will not be welcomed in Germany, where there are fears that taxing one part of the Eurozone to pay for another could leave them footing the bill.
ITV News Economics Editor Richard Edgar on the Governor of the Bank of England's comments:
Bank of England Governor Mark Carney praised the European Central Bank for the "boldness" of its plan announced last week to buy hundreds of billions of euros of government bonds to fight the "potentially dangerous" combination of weak growth and falling prices.
But he criticised the eurozone for failing to act on other reforms, including making the single currency area more like the United States, where states cushion one another against economic shocks via federal government transfers.
"It is difficult to avoid the conclusion that, if the eurozone were a country, fiscal policy would be substantially more supportive," he said in a speech in Dublin.
The Governor of the Bank of England launched a broadside against eurozone austerity policies, warning that it was caught in 'a debt trap'.
Mark Carney's comments come as Greece's new Prime Minister confirmed he will be fighting the tight austerity policies placed on the country by the EU.
Since the financial crisis all major advanced economies have been in a debt trap where low growth deepens the burden of debt, prompting the private sector to cut spending further. Persistent economic weakness damages the extent to which economies can recover. Skills and capital atrophy. Workers become discouraged and leave the labour force. Prospects decline and the noose tightens.
As difficult as it has been, some countries, including the US and the UK, are now escaping this trap. Others in the euro area are sinking deeper.
Mark Carney, the Governor of the Bank of England (BoE) has said that inflation is more than likely to fall below 1% over the next six months. Its growth expectations for next year have been cut from 3% to 2.9%.
Bank of England says inflation "more likely than not" to fall below 1% in next 6 months. Economic growth will be slower than expected
Inflation likely to remain close to 1% for next year with pay almost double that, says Mark Carney.
Bank of England Governor Mark Carney said his warning that record-low interest rates will rise sooner than markets expect was "a personal view."
ITV News Economics Editor Richard Edgar reports:
Committee chairman pressing Carney that his Mansion Hse speech which took markets by surprise was a personal view.
It was the intended consequence of your speech to change expectations about the first move on interest rates, Carney is asked: "Absolutely"