UK economy: Bank of England chief downgrades growth forecasts

10th August 2011

The Financial Times (paywall) reports that in its quarterly inflation report, the Bank also believed there was “a good chance” inflation would touch 5 per cent but that the timing of any subsequent decline was highly uncertain.

The Bank said: “In the UK, the squeeze in households’ real incomes is likely to continue to weigh on domestic demand, especially over the next year or so. But expansionary monetary policy, prospective growth in global demand and the current level of sterling should mean that, after some near-term weakness, GDP growth gradually picks up.”

This means interest rate rises have been taken off the agenda, The Guardian reported.

Mervyn King, the Bank's governor says the greatest risk to the UK's economic recovery come from the eurozone and that it could take years to bring high debt under control in some eurozone countries.

On the Guardian comment boards readers such as neilwilson expressed concern over King's ability to assess the UK's economic health.

"Looks like he's still struggling with basic sectoral economics. Non-government sector surplus = government sector deficit.They can't both reduce their 'debt mountains' at the same time.

At least not without a massive economic contraction and large bankruptcies which would be at odds with a 1.4% growth prediction."

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