Bank of England unveils Quarterly Inflation Report
Presenting today’s Quarterly Inflation Report, the Bank of England’s Governor, Mervyn King, said: “the overall outlook is weaker than that expected in the May report”.
Mr King warned that the UK economy faces a “choppy recovery” over the next two years.
In its latest report, the Bank of England is predicting that inflation will fall below its target of 2% by the end of 2011.
In its previous inflation report in May, the Bank said inflation would remain above the 2% target for the remainder of 2010.
However, the recent decision to hike VAT to 20% next year by the coalition Government will undoubtedly keep inflation higher, said the Bank.
There has been speculation that the Bank might elect to hike interest rates to combat stubborn inflation, which at 3.2%, is way above target.
The inflation rate is a benchmark for the Bank’s Monetary Policy Committee (MPC) but the Bank’s report has stated inflation will fall even in interest rates remain at the historic low of 0.5%.
The report suggests there is now further scope for policy easing should the economy deteriorate.
Meanwhile, economic growth is expected to be slower – forecast to be at a rate of just over 3% in two years time. This is primarily due to tough austerity measures announced in the emergency budget in June, which are expected to hamper growth.
In it last inflation report in May, the Bank predicted growth of around 3.6%.
Meanwhile, in other news today, the Office for National Statistics (ONS) revealed UK unemployment dipped in the three months to June.
According to the ONS, the number of people unemployed in the UK fell to 2.457 million.
The ONS said the jobless total dived by 49,000 in the three month period – representing the biggest quarterly drop since June 2007 and the second consecutive month that the jobless number has fallen.
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