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Bank of England reduces UK growth forecast to 1%

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by Jan Harris
Bank of England reduces UK growth forecast to 1%

The Bank of England has reduced its growth forecast to 1 per cent and does not expect inflation to fall to its 2 per cent target until the middle of next year.

Presenting the Bank’s quarterly Inflation Report, the governor of the Bank of England, Sir Mervyn King, said that economic recovery would be “slow and protracted”.

One off events such as the Olympics boosted growth figures in the July to September quarter, while bad weather contributed to weak growth in the quarter from April to June.

Sir Mervyn warned that this fluctuating pattern was likely to continue, with lower output in the fourth quarter.

He said: “Continuing the recent zig-zag pattern, output growth is likely to fall back sharply in Q4 as the boost from the Olympics in the summer is reversed.

Indeed, output may shrink a little this quarter,” he said.

Sir Mervyn warned that recent figures create an “overly optimistic impression” and said that economic growth is not expected to reach pre-financial crisis levels until mid-2015.

Meanwhile, the Treasury has added Sharon Bowles to the shortlist to replace Sir Mervyn as Bank of England Governor

Ms Bowles, a physicist and mathematician, is a Liberal MEP who chairs the European Parliament’s economics and monetary affairs committee.

If she is appointed she will be the central bank’s first female governor in its 318-year history.

The shortlist also includes favourite for the role, the current deputy governor Paul Tucker, as well as Lord Burns, chairman of Santander UK; Sir John Vickers, chairman of the Indepedent Commission on Banking; and Lord Turner, chairman of the Financial Services Authority.

The Chancellor is expected to make a decision on the appointment within weeks.

Ms Bowles said: “We need a strong signal of change, change that flows through the City.

“The new Governor has is to restore faith in the banking system. What bigger sign of change is there than choosing a woman and an outsider?”

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News posted: November 14, 2012

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