Bank of England cuts UK economy growth forecast

Bank lowers growth estimate, blaming weak global economy, and signals that interest rates to stay at record low The Bank of England gave no indication that it would provide more economic stimulus on Wednesday as it cut its growth forecasts for the UK economy, blaming the weaker global economy. It signalled that interest rates will stay at a record low of 0.5% for a long time to come. In its latest quarterly forecasts, the Bank lowered its growth estimate for 2011 as a whole to around 1.4%, from a previous forecast of around 1.8%. The Bank expects that the UK growth rate will reach 2% on an annual rate by the fourth quarter of this year – down from 2.5% in May. In two years’ time, annual growth is seen at 2.7%, a fraction lower than in May. “August’s UK inflation report echoes Tuesday’s message from the US Federal Reserve that interest rates are likely to stay very low for a long time yet,” said Vicky Redwood, senior UK economist at Capital Economics. Speaking at a press conference, the Bank’s governor Mervyn King said the greatest risks to Britain’s economic recovery come from the eurozone. He said the UK must work with other countries to reduce public and private debt mountains. “Were [the risks] to crystallise, the risks emanating from the euro area have the potential to have a significant impact on the UK economy,” the Bank said. On Tuesday, the US Federal Reserve took the unusual step of freezing interest rates close to zero for at least two more years, and said it would consider further steps to boost growth. The Bank predicts that inflation will peak about around 5% later this year due to rising utility bills – the same as the May forecast – before falling steadily to 1.8% in two years’ time, a degree lower than expected three months ago and below the Bank’s 2% inflation target. King reiterated comments he made in January about household incomes suffering the worst squeeze in decades. “This is a long and deep squeeze in real living standards,” he said, adding that the good news is that oil prices have come down in recent days. Bank of England Economic growth (GDP) Inflation Interest rates Economics Banking Global recession Global economy Financial crisis Julia Kollewe guardian.co.uk

Posted by on August 10, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.