Bank lowers 2011 growth forecast by 0.9%
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The Bank of England has downgraded its forecast for economic growth by 0.9% for next year.
The Bank now expects the economy to grow by 2.5% in 2011, down from its previous forecast of 3.4%.
Mervyn King, the governor of the Bank of England, has warned that the UK economy faces a “choppy recovery” over the next two years.
King says that a lack of bank lending will limit economic growth.
The Bank’s Quarterly Inflation Report is predicting that inflation will rmain ahead of its 2% target next year but should be back on track in 2012.
King says: “I can assure you the Monetary Policy Committe is very concerned about what’s been happening to inflation. I do think that we have seen a sequence of shocks, price level shocks, which have inevitably raised inflation. We have also seen in the past three years two episodes now in which inflation did go up quite significantly and then came down quite sharply.
“And I think our judgement is that next year we will see a repeat of that. But there is great uncertainty about that, and the Committee will judge it month by month.”
Readers' comments (3)
Tom IFA | 11 Aug 2010 2:28 pm
If we cannot have decent growth to help us out of the proverbial then inflation is second best. Ask anyone who was around during the last 3 recessions a little inflation with low interest rates and a weak pound can work wonders. To counter inflation late next year we will have higher interest rates at a level where the banks make a fortune from lending. Boom will follow for a few years with the next entrepeneur heoes emerging and then few years later just when we were least expecting it BUST! See you on the merry do 'round.
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Anonymous | 11 Aug 2010 4:26 pm
Mervyn King was in charge of the BOE under the labour government that produced inflated figures for growth. If he had challenged them then, he would not be revising them downwards again and again.
It should be set in stone that if inflation stays above the target of 2% for a set period of time then interest rates would go up otherwise the target is meaningless.This inevitably creates uncertainty and volatility in financial markets.You cannot force the banks to lend if they dont want to.
It is mostly rhetoric from this coalition and by the time it is legislated for(if it ever gets passed by many unhappy MP's) the coalition would have broken up and the Lib Dems would be swallowed up by the cons, just like a whole cake sliced into pieces.
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ged | 12 Aug 2010 2:05 am
They cant force the banks to lend but the banks the public part owns could be made to be more competetive with their lending which would force the other banks to compete to maintain their market share.
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