<p>The UK faces a “bumpy road” with falling house prices and high inflation, the Bank of England has warned.</p> <br><p>Governor Mervyn King stated that the near term outlook for inflation had “deteriorated markedly” over the last three months. Inflation would almost certainly increase in the coming months, thanks to rising energy and import prices, King told.</p> <br><p>The impact of tighter credit conditions was its most apparent in the property markets, King continued, with house prices falling. </p> <br><p>“The monetary policy committee is facing its most difficult challenge yet,” King stated. “For the time being, at least, the ‘nice’ period is behind us. The credit cycle has turned.</p> <br><p>“Commodity prices are rising. We are travelling along a bumpy road as the economy rebalances. Monetary policy cannot, and should not try to, prevent that adjustment.”<br> <br>According to reports, economists have taken King’s words to mean that next month’s possible interest rate cut will not go ahead.<br> <br></p>