U.K. inflation rate slowed to 4.8% in November, according to the consumer price index annual gauge, in line with median forecasts, from 5.0% in October.

After the release of the news, the pound rebounded slightly against the U.S. dollar to trade around 1.5580, while recording a low of 1.5564, compared with the day's opening of 1.5582.

over monthly basis, CPI also came similar to projections of 0.2%, 0.1% above the prior reading.

Another measure of inflation, which is the retail price inflation and known as the cost of living index, retreated to 5.2% in the year ended in November from 5.4% while rose to 0.2% from 0.0% over monthly basis.

Inflation eased last month despite the rebound in oil prices where crude prices closed the month at $100.39 a barrel compared with the month's opening at $97.11.

King in his open letter to the Chancellor of the Exchequer, George Osborne, last month explained that inflation may retreat even below the 2% target, referring that factors keeping inflation above the target are still the same (the increase in the VAT from 17.5% to 20% at the beginning of the current year and the rise in import and energy prices).

He said inflation will retreat sharply in the coming six months, due to the escalating European debt woes, slowdown in global growth and drop in U.K. household consumption, and continue its fall to approache the target by the end of 2012, noting that the bank is "uncertain about the precise pace and extent of the drop in inflation."

This month, the BoE opted to leave interest rate unchanged at 0.50% and stimulus at 275 billion pounds, to assess the impact of the 75 billion pounds announced in October which will end in February with the release of the coming inflation report that will provide an update about the latest growth and inflation outlooks.

The British economy expanded 0.5% in the three months ended September, according to the GDP advanced reading, compared with the 0.1% expansion recorded in the second quarter.

However, still there are concerns that the British economy may face sluggishness in the coming period as the sharp spending cuts by the government to rein the huge budget deficit had led to cut in growth and rise in unemployment.

BoE policymaker Martin Weale said there is a possibility that the economy could witness contraction in the fourth quarter, while Paul Fisher said there is a high probability the U.K. could experience another recession and the BoE may add further to stimulus after the current round is completed.

Thus, amid the current slowdown in growth and receding inflation, the BoE may increase stimulus at the beginning of 2012 to boost the economy.

Meanwhile, policy makers are keeping an eye lid on the latest developments from the euro area, the U.K.'s main trading partner, as the British economy was negatively affected by the escalating European debt crisis.

Worries came back to markets as Fitch raised concerns that debt woes in the euro area would continue in 2012 as it said on Monday the decisions announced in last week's EU summit, which Fitch described as incomprehensive, are not enough to ease pressure on the euro zone nations.

Data released today from the euro area showed that investor's confidence (economic sentiment) showed improvement to -54.1 in December from -54.1 in November, while the same gauge in Germany retreated to -53.8 from -55.2.