Jeremy Warner's Outlook: You'll be pleased to know that the inflation target has been suspended - for three years

For those hoping the Bank of England might be prepared to throw caution to the wind, and cut interest rates with impunity to address the slowdown in the economy, there was a stark warning yesterday. Mervyn King, the Governor, insisted that monetary policy cannot and should not try to prevent what he sees as a necessary adjustment in the economy, where disposable incomes and therefore consumption remain squeezed for perhaps years to come.

Yet though this is the sort of hair-shirt message that central bankers have to send out in conditions where inflation is rising and the economy is slowing, he perhaps protests a little too much. In fact the Bank seems willing to allow quite a lot more inflation than a strict interpretation of its remit would imply.

The Governor anticipates having to write a number of open letters to the Chancellor over the next year to explain why inflation is so much above target, while yesterday's Inflation Report alarmingly forecasts that, on present expectations of policy, inflation won't finally return to the 2 per cent target until some time in 2011. I'm not sure three years counts as what the Governor calls "the medium term".

Certainly it is hard to see how Britain can escape second-round effects if these elevated levels of inflation persist for as long as three years. Absent of a calamitous rise in unemployment, workers are bound to try and recoup the loss of buying power through wages. Quite a test looms for Britain's "flexible" labour market.

Yet as Mr King points out, to bring CPI inflation back to target more rapidly would result in what he quaintly calls "an undesirable degree of volatility in output", for which read a recession. The words come straight from the Bank of England's own remit, which allows the wriggle room now being used in conditions where meeting the target might cause the economy to collapse.

In the event, inflation and growth are quite unlikely to follow the exact trajectory outlined in yesterday's Inflation Report. Something will come along to push one or both of them off course. Who knows? Perhaps next time the medium term might be four years.