BoE issues gloomy quarterly inflation report
The Bank of England has released its latest quarterly inflation report, which warned that the UK recession is worse than expected but economic recovery prospects are improving.
In addition the Bank forecast that the consumer price index inflation benchmark is to stay well below its 2% target for the next two years – inflation is currently at 1.8%.
The Governor of the Bank of England, Mervyn King, will have to write to the Chancellor, Alistair Darling, later this year to explain why inflation has fallen below the target.
In the meantime, the Bank expects the economy to contract by around 5.5% at the lowest point this year before beginning its recovery.
However, the bank did highlight that while the economy had contracted more than expected at the beginning of the year, the pace of contraction had slowed.
Last week, the Bank elected to keep interest rates on hold at 0.5%, but also pressed ahead with pumping a further £50 billion of new money into the economy via its quantitative easing programme, in a bid to drag the country out of recession.
At the time, the additional £50 billion suggested to analysts that the UK recession “appears to have been deeper than previously thought”.
However, the report said there were “encouraging signs” that the measures taken to boost the economy had been having an impact.
In other news today, figures released by the Office for National Statistics (ONS) show that the number of unemployed in the UK has risen to its highest level since 1995.
Official figures show that unemployment increased by 220,000 to 2,435,000 in the three months to June, and takes the unemployment rate to 7.8%.