Bank of England forecasts zero economic growth
The Bank of England does not expect the UK economy to grow at all this year according to its latest quarterly report.
It had previously forecast growth of 2 per cent for 2012 but recent gloomy economic data has led to the growth forecast being revised downwards.
The forecast for medium-term growth has also been cut, with the economy now expected to grow 2 per cent by 2014 instead of the 2.5 per cent growth forecast in May.
Gross domestic product contracted by 0.7 per cent in the second quarter of 2012 following the extra bank holiday for the Queen’s Jubilee and a period of exceptionally wet weather.
Today, the governor of the Bank of England, Sir Mervyn King, said that unlike the Olympic athletes, the UK economy has not yet reached full fitness.
He called for Britain to take inspiration from the Olympic team in tackling an economic challenge that could take years to achieve.
Sticking with the Olympic theme, he said that anyone who could accurately predict the course the UK economy and the eurozone crisis, deserved a medal.
The Bank will continue with its efforts to re-balance the UK economy, with an economic stimulus of £50bn in the next four months.
This will take the amount it has pumped into the economy to £375bn.
It has decided not to reduce the base rate, which already stands at the historically low level of 0.5 per cent.
Sir Mervyn said: “We have not cut Bank Rate because it would be counter-productive and hurt building society sector.
“But a quarter-point change of Bank Rate is not going to be the difference between recovery and non-recovery.”
According to the National Institute of Economic and Social Research, the UK economy shrank by 0.2 per cent in the three months to the end of the July.