States the issues clearly:

King Says U.K. Inflation May Match Fastest Pace in a Decade

(Bloomberg) Bank of England Governor Mervyn King said inflation may match the fastest pace in at least a decade this year and require an explanation to the Treasury, a sign that policy makers have limited scope to cut interest rates.

“It is possible that inflation could rise to the level at which I would need to write an open letter of explanation, possibly more than one, to the chancellor,” King said in a speech today. “To put it bluntly, this year we are probably facing a period of above-target inflation and a marked slowing in growth.”

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