High oil prices are set to be a constant feature for the U.K. economy in the medium term, pushing up inflation and slowing consumer spending, Bank of England Governor Mervyn King said Thursday. In an interview with The Belfast Telegraph, King said that markets weren't expecting a near-term fall in oil prices, something which would only come about as new sources of oil are found. "Some of the (oil price) increases in the last couple of weeks are almost certainly temporary but the big increase in price over the last year will remain," King said. "Those increases are the result of strong global demand for oil, particularly from China, and the price of oil futures shows that the markets do not expect an early revision to the low oil prices we had got used to a couple of years ago. "It will take a long time for new sources of oil to be developed, which would then bring down the price significantly," King said. The governor said that the rising cost of fuel in the U.K. would push up inflation in the short term. He said it would increase business costs while reducing consumer spending power. In the U.K., consumer price inflation reached 2.3% in July, above the BoE's target of 2% inflation and up 0.3 percentage pointfrom the previous month. The main reason for the jump in CPI inflation was the rising cost of fuel. The U.K. has also experienced slowing consumer spending during 2005, one of the factors which led a narrow majority of the BoE's nine-member Monetary Policy Committee to vote to cut interest rates to 4.5% from 4.75% in August. Governor King was, however, in the minority that voted for rates to stay on hold. During the interview King also noted the damping effect inward migration to the U.K. has had on wage inflation, particularly with the high number of new workers from Eastern Europe. "One of the effects of employing these workers is to enable the economy to grow without upward pressure on wage inflation," King said. And King praised the role of the private sector in supporting the continuing peace process in Northern Ireland. "The business community is much more forthcoming in saying that there is a need to develop the private sector in Northern Ireland," King said. "They know they need a strong private sector and a prosperous all-Ireland economy to underpin the peace process and I sense much greater self-confidence among the business community that they can put such an economy in place." Earlier Thursday King said during an interview with BBC Radio Ulster that U.K. consumers were being more cautious, but that the outlook for the economy as a whole was "reasonably optimistic." "People are still spending in the shops, but carefully," King said. "It's a reasonably optimistic economic picture for the U.K....we still see a growing world economy (with the) German economy picking up." King said that the pick up in areas such as Germany would help U.K. exporters, adding that it was still possible for U.K. manufacturing firms to prosper, particularly those who concentrated on niche products or strong design. He said that while it was clear that emerging countries such as China would take a lead in manufacturing, the increased wealth of its people would present further export opportunities for U.K. businesses. "The idea that in the future the Chinese will make everything and we shall make nothing is very silly," King said.