The increase in energy prices and its impact on inflation due to the Iran war has been frustrating, but it is being met by a softer economy that is weighing on prices, Bank of England Governor Andrew Bailey says. Inflation would have fallen to the bank's 2% target in April or May without the conflict, he told CNBC at the European Central Bank's forum in Sintra, Portugal. But softening economic activity in recent months, a cooling labor market and the fall in oil prices in the last few weeks suggests indirect effects are coming in lower than expected, he says. "I am encouraged by that". Inflation will still rise a little higher to around 3.2%, he adds, from 2.8% in May. (edward.frankl@wsj.com)