Kings says worse inflation and growth outlook

LONDON (Reuters) - The outlook for both inflation and growth is worse, Bank of England Governor Mervyn King said on Thursday.

King said in testimony to a parliamentary committee that the economy was expected to slow in the coming year but inflation was also expected to go up in the short-term before settling back at the 2 percent target in two years.

Despite the risks to growth, he and other members of the Monetary Policy Committee gave little indication that the central bank would cut interest rates next week.

Deputy Governor Rachel Lomax said evidence of a sharp slowdown was so far patchy while chief economist Charles Bean said the predicted downturn in the economy was relatively soft, similar to that in 2005.

Arch-hawk Tim Besley, meanwhile, said the slowing in the economy so far was what the BoE had expected back in August and the financial market turmoil had done some of the MPC's tightening work for it.

"There's still a fair amount of inflationary pressure out there and we will have to see to what extent events in the real economy reflect that," Besley said.

"I would say that (risks) are slightly to the upside on inflation and slightly to the downside to growth."

Only arch-dove David Blanchflower -- who has already voted for a cut in interest rates for two months running -- was more worried about on the growth outlook.

"My concern is that output would decline more on the downside than others had thought," he said, ascribing a 50-50 probability to a recession in the United States.