Bank of England lowers economic growth forecast

| August 10, 2011 | 0 Comments

Presenting the Bank of England’s latest quarterly inflation report, Governor Mervyn King has said the central bank has lowered its growth forecast for the UK economy.

The Bank now expects growth for 2011 to be around 1.5%, revised downwards from its previous estimate of 1.8%

The downgrade comes as the Governor warned that the “headwinds are growing stronger by the day”.

Its latest estimate is broadly in line with other forecasts; recently, the Confederation of British Industry (CBI) said it expects growth of 1.3% this year, down from its May forecast of 1.7%.

Meanwhile, the Ernst & Young ITEM Club recently lowered its growth forecast for the UK economy after warning that the UK is at a “critical juncture”.

The ITEM Club now believes the UK economy will expand by 1.4% this year, down from an earlier estimate of 1.8%.

The Chartered Institute of Personnel and Development (CIPD) recently revised its growth forecasts to 1.4%, while the International Monetary Fund believes the UK economy would grow by 1.5% this year.

Meanwhile, the Bank’s report said the global economy is suffering amid the euro zone debt crisis and fears of contraction in the US.

Mr King said: “The imbalances in the world economy are still not being properly tackled and the burden of debt is still there.

“This problem will take, I think, a number of years before we will find our way through it.”

Meanwhile, the central bank still expects inflation to reach 5% this year due to rising energy bills, but reiterated that inflation will fall next year and will return to its 2% target in the “medium-term”.

Despite soaring inflation, the Bank hinted that interest rates will remain at the record low of 0.5% for some time to come.

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