Bank of England slashes growth forecasts
THE BANK of England has slashed its central growth estimate to no more than 1pc in both 2011 and 2012 with a dramatically increased threat of a double-dip recession next year.
Its quarterly inflation report revealed a greater chance of the economy contracting in the first three quarters of 2012, compared with its August forecasts, as eurozone and banking concerns and squeezed household budgets continue to weigh on growth.
Earlier expectations were for growth of around 1.5pc and 2.2pc respectively.
The worsened prospects for the UK economy mean inflation is likely to fall far quicker than previously estimated, hitting the Government's 2pc target in the second half of next year before falling to as low as around 1.3pc in 2013.
British bank governor Sir Mervyn King warned the "journey to a more balanced world economy will be long and arduous".
He said UK economic activity will be broadly flat until the middle of next year and added that the country faces a "difficult economic environment".
Today's report backs the City's view that the Bank will keep interest rates on hold for the foreseeable future and add another £75bn (€88bn) to its quantitative easing programme by February.
Vicky Redwood, chief UK economist at Capital Economics, said: "Even the Bank's downgraded growth forecasts still look optimistic to us - we expect zero growth next year."