LONDON (AFX) - The Bank of England said in its February Inflation report that RPI-X inflation is likely to "bump along at around 2 pct" in 2002 before rising to reach close to the 2.5 pct official target in 2004. The Bank said RPI-X inflation is likely to run slightly below target in the near term, although monthly movements are likely to remain erratic, reflecting various one-off factors. This remark appeared to account for yesterday's unexpectedly high January RPI-X reading. The annual rate was at 2.6 pct, breaching the official 2.5 pct target. "The inflation profile is very close to that in the November Report," the bank said. However the Monetary Policy Committee believes that the overall risks to inflation are on the upside, reflecting the impact of a possible exchange rate fall on import prices. Some MPC members prefer different views which mean the central projection could be lower by about 1/4 percentage point or marginally higher than the 2.5 pct target, it said. The BoE also noted that considerable uncertainties surround these forecasts. Firstly, the possibility that the slowdown in the international economy may be more prolonged remains a downside risk. Secondly there is uncertainty about the speed and timing of any moderation in consumption growth. Finally, a sharp fall in the exchange rate may lead to upside risk for prices. Assuming that interest rates stay at 4 pct, the central projection is for GDP growth to slip further in the first half of this year, reflecting sluggish world activity and smaller corporate spending. However, GDP growth then rises to around trend as renewed global growth, a recovery in domestic investment and higher public spending outweigh the impact of a moderation in consumer spending, it said. "Growth over the two years is very similar to that in the November Report," it added. Despite this the MPC believes the overall risks to growth are weighted to the downside. Turning to consumer demand, the MPC expects past falls in equity wealth and slowing real income growth will moderate consumer spending over the course of 2002 and 2003. However it added that "there is a possibility that high and rising levels of consumer debt might cause a sharper slowdown." The MPC expects investment to remain weak in the near term, but to recover as growth picks up. While the near-term outlook for world output is slightly weaker than expected in the November Inflation Report, the prospect is still for a steady recovery during the latter part of this year and beyond, the bank said.