LONDON (AP) — Bank of England governor Mervyn King warned yesterday that planned money market reforms by the central bank will not provide long-term assistance to banks facing tougher lending conditions, arguing that was a government responsibility.

King added that surging inflation was likely stay above target levels in the coming months, dampening expectations of a rate cut.

The Bank of England is due to publish proposals next week on a permanent successor to its current Special Liquidity Scheme, which allows banks to shore up their balance sheets by swapping riskier assets for safer Treasury bonds.

However, giving evidence to a Parliamentary committee on the bank's quarterly inflation report, King told lawmakers that the proposals "will not and cannot solve the shortage of funding to finance bank lending, including mortgage lending" over the long term.

"Only private savers or taxpayers via the government can provide such funds," he added.

The central bank introduced a $100 billion special liquidity programme in April, allowing banks to swap assets that had value, but couldn't be used to raise money because of rampant fears over the existence of lower-quality securities backed by mortgages to people with weak credit.

King has said a long-running scheme would need to strike the right balance between avoiding a major shock to the system and inadvertently encouraging risk-taking.

He also told lawmakers yesterday that it "would not be surprising" if he had to write to Treasury chief Alistair Darling next week to explain why inflation — already at 4.4 percent — had again exceeded targets of two percent, but added that the measure should come back to target levels.

The Bank of England governor is required to write a public explanatory letter when inflation exceeds that target for successive months.

"In the UK, we face a difficult but temporary period during which inflation will remain high for a while but output growth, at best, weak," he said.

"But provided we do not impede the required adjustment we will come through this temporary period and resume a path of normal economic growth with inflation close to target," he added.

A Bank of England survey released before King's testimony to the Treasury Select Committee indicated that consumers expect inflation to reach 5.4 percent, with an average rate of 4.4 percent over the next year.

Ongoing high inflation makes it less likely that the bank will cut interest rates to spur the domestic economy as it slides into recession — trimming rates can also spur spending and inflation.

Global Insight economist Howard Archer, who had previously forecast at least one cut in rates from the current five percent by the end of the year, said that prediction was now less certain.

"We marginally lean towards the view that interest rates will be cut from five percent to 4.75 percent before the end of 2008, with a move occurring in November," he said.