Bank of England set to cut growth forecast
Tuesday 15 May 2012
The Bank of England will paint a gloomier view of the UK's recovery tomorrow in its first assessment on prospects since the return to recession.
Governor Sir Mervyn King is expected to indicate growth of around 0.75 per cent in 2012, compared with the 1.2 per cent predicted three months ago and 2.2 per cent a year ago.
And while inflation has not fallen as expected, with the consumer price index rising in March to 3.5 per cent, the Bank will stick by earlier expectations that the figure will fall to the 2 per cent target by the end of this year.
The Bank stopped short of increasing its quantitative easing programme last week despite a 0.2 per cent decline in the first three months of the year, meaning the UK is in a technical recession,
Sir Mervyn is already braced for a choppy year, with events such as Olympics and an additional bank holiday granted for the Queen's Diamond Jubilee expected to see growth "zig zag" throughout 2012.
But while economists expect the Bank to cut growth estimates for 2012, they predict the downward revision to figures for 2013 will not be much lower than 2.8 per cent in its last report.
Alan Clarke, UK and eurozone economist at Scotiabank, believes the Bank will forecast growth of around 0.75 per cent in 2012.
He said: "The economy hasn't grown for six months, and the headline second quarter GDP data are unlikely to stray much above zero, even if the underlying picture is more robust."
In its last report, the Bank forecast GDP growth of around 1.2 per cent this year and around 2.8 per cent in 2013, while inflation will hit its 2 per cent target in the final quarter of 2012 and fall to as low as 1.5 per cent the following year.
The Bank has previously questioned the ONS figures, calling a drop in construction output "perplexing" and adding that underlying growth in the UK appeared to be strong.
But the picture is mixed as exporters are now facing fresh headwinds from a strengthening pound and weak demand in the euro zone, where the economy stagnated in the first quarter.
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.
The Bank pumped £50 billion into its quantitative easing (QE) programme in February but members of the monetary policy committee (MPC) vetoed increasing the stock of asset purchases from £325 billion in their last meeting.
Vicky Redwood, chief UK economist at Capital Economics, said while inflation forecasts will be roughly the same tomorrow as in February's report, this does not mean further QE will be ruled out.
She said: "After any downgrade this week, the MPC's new growth forecasts are likely to remain far too optimistic. Accordingly, we continue to expect a third round of QE to start later this year."
Is your name now 'banned' in Saudi Arabia?
Exclusive: World’s most pristine waters are polluted by US Navy human waste
Croatia's second city to close 'worst zoo in the world' after reports of 'nightmare' conditions and 'depressed' animals
Missing Malaysia Airlines Flight MH370: Did jetliner fly into area controlled by Taliban? Net widens after claims final satellite signal could have been sent from the ground
Missing Malaysia Airlines Flight MH370 Q&A by Simon Calder: How far could it have travelled? Who was responsible and what would their plans be? And how can a plane just vanish?
Katie Hopkins continues campaign to become Britain's most hated talking head with poorly timed Bob Crow tweet
Ukip and Nigel Farage on course for remarkable victory in European elections
No EU referendum under Labour: Ed Miliband to reveal that vote on membership is ‘unlikely’ in next Parliament if party wins power
Tony Benn was entirely ineffectual - and usually wrong
The rise of Ukip: Study warns Labour that Eurosceptic party's electoral base now 'more working class than any of the main parties'
Europeans have ‘got whiter’ due to natural selection in past 5,000 years, scientists say
- 1 Is your name now 'banned' in Saudi Arabia?
- 2 Gender-specific books demean all our children. So the Independent on Sunday will no longer review anything marketed to exclude either sex
- 3 Missing Malaysia Airlines Flight MH370 Q&A by Simon Calder: How far could it have travelled? Who was responsible and what would their plans be? And how can a plane just vanish?
- 4 California man Christopher Viatafa surrenders to police after googling own name and discovering himself listed as ‘most wanted’
- 5 'Missing Malaysia Airlines Flight MH370 plane found in Bermuda Triangle!' Viral Facebook links are profiting hackers
£50000 - £60000 per annum: Charter Selection: This well respected and exciting...
£40000 - £50000 per annum: Charter Selection: This exciting company and market...
£40000 - £60000 per annum + EXCELLENT SALARY: Austen Lloyd: Senior Private Cli...
£25,000 to £35,000: IT Connections Ltd: Signal Processing Engineer / Acoustics...