London  - The Bank of England Wednesday delivered a forecast of a "prolonged" economic slowdown while dampening hopes of further interest rise cuts in view of rising inflation.

The Bank's quarterly inflation report, presented by central bank governor Mervyn King, said that inflation would probably stay above the 2-per cent government target for the next two years, hampering the economy.

Figures released Tuesday showed that the rate of inflation based on the Consumer Price Index (CPI) rose to 3 per cent in April.

The headline rate of RPI inflation, which includes mortgage interest payments, rose to 4.2 per cent in April from 3.8 per cent in March, the figures showed.

"We are travelling along a bumpy road as the economy rebalances," King said in his report which, however, denied that the British economy was heading for a full-scale recession.

"The central projection is for growth to slow sharply in the near term," said King.

But eventually, the British economy would bounce back, helped by the weaker pound boosting exports and access to financing in the global market becoming easier.

"Inflation will return to the target and growth will eventually recover to a sustainable rate. But we will need to be patient," said King.

The balancing act faced by the Bank's Monetary Policy Committee over interest rates was therefore "the most challenging yet."

"For the time being at least, the nice decade is behind us," said the central bank governor. (dpa)