Bank of England to cut growth forecast to zero
Tuesday 07 August 2012
The Bank of England will slash its growth forecasts close to zero tomorrow as the double-dip recession deepens and the eurozone storm closes in on UK shores.
Governor Sir Mervyn King is expected to indicate no growth for 2012 in the Bank's quarterly inflation report, compared with 0.8 per cent predicted three months ago and 2 per cent a year ago.
As the sluggish economy weighs on prices, inflation forecasts are likely to be cut as well, with the consumer price index dipping below the Government's 2 per cent target by the end of the year.
The UK economy contracted by a greater-than-expected 0.7 per cent between April and June, meaning the double-dip recession is the longest since the 1950s, after the additional bank holiday for the Queen's Diamond Jubilee hit output.
Sir Mervyn is already braced for a choppy year, with events such as the Olympics expected to provide a slight bounceback, but nevertheless economists predict a bleak outlook from the central bank.
Howard Archer, chief UK and European economist at IHS Global Insight, said the Bank will "likely acknowledge that the economy has taken a significant turn for the worse and currently faces a worrying and uncertain outlook".
The Bank last month injected a further Â£50 billion into the economy through its quantitative easing programme, bringing the total stock to Â£375 billion.
But the outlook has darkened since the Bank's move as dire construction and manufacturing output drove the biggest drop in GDP since the height of the financial crisis three years ago.
Meanwhile, in the eurozone, borrowing costs in Spain and Italy remain at high levels, close to the so-called bailout territory that drove the likes of Greece and Ireland into taking a bailout from the EU.
Homeowners are in for a boost as the report is expected to show that interest rates will be maintained at their historic low of 0.5 per cent, or close to that, for at least several more months.
But a gloomy report from the Bank is likely to pile more pressure on Chancellor George Osborne to soften his harsh austerity measures and move to boost growth in the economy.
The IMF, led by former French finance minister Christine Lagarde, last month said the Government should ease its fiscal consolidation, which includes spending cuts and tax reforms, if the recovery continues to stall.
- 2 Rarest Beanie Baby of them all could be sold for £62,500 on eBay
- 3 Professional big game hunter Ian Gibson crushed to death by elephant during hunt
- 4 Farmer told to tear down mock-Tudor castle after hiding construction behind hay bales
Migrants crossing the Mediterranean: Pope Francis joins calls for EU action on boat refugees
Yemen crisis: Meet the child soldiers recruited by the Shia Houthi rebels who have forsaken books for Kalashnikovs
Alan Rickman admits editing 'terrible' script with friends in Pizza Hut behind backs of writers on Robin Hood: Prince of Thieves
Rarest Beanie Baby of them all could be sold for £62,500 on eBay
Isis in Afghanistan: Group claims responsibility for Jalalabad suicide bombing that killed 35
If I’m being racially abused I don’t need a stranger with a saviour complex to rescue me
The only black face in the Ukip manifesto is on the page about overseas aid
Ukip is the only main political party to not address LGBT rights in its manifesto
Food banks: One million Britons will soon be using them, according to Trussell Trust
Religion isn't growing, it is becoming vigorous in its demise, says philosopher AC Grayling
BBC election debate: The one photo that summed up the whole 90-minute leaders debate
iJobs Money & Business
£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...
£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...
£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...
£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...