Bank's Besley says inflation to fall below target next year

LONDON (Reuters) - A rapid fall in global commodity prices means inflation is likely to fall below target next year despite a weakening currency, Bank of England policymaker Timothy Besley said on Tuesday.

Speaking hours after data showed inflation tumbled to 4.5 percent in October from 5.2 percent in September, Besley said the inflation outlook fully justified the central bank's decision to slash rates earlier this month.

The central bank aims for inflation to be at 2 percent over a two-year horizon. The Bank cut its main lending rate by 1.5 percentage points last week, three times the cut most analysts had expected.

"The move in Bank Rate in November can be justified by the outlook for inflation," Besley said. "It is essential, in my view, that monetary policy decisions remain focussed on our inflation targeting mandate."

At 3 percent, interest rates are already at their lowest level since the 1950s and investors expect they will fall below 2 percent next year.

Besley said one reason analysts had failed to predict the size of the central bank's interest rate cut this month was because of an unhelpful obsession with labelling monetary policymakers "hawks" or "doves." Another reason was that analysts placed too much weight on the bank's past decisions.

"Since the summer, the outlook for global commodity prices has changed rapidly," Besley said.

"These global price developments (assuming they are sustained) mean that inflation is likely to fall below target next year, notwithstanding the upward pressure on inflation from the continued fall in the value of the pound."

A weaker currency typically pushes up inflation by making imports more expensive. The pound has recently fallen to its lowest level against a trade-weighted basket since 1996.