Bank of England set to cut growth forecast

 

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."

PA

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Parts Advisor

£16500 - £18500 per annum: Recruitment Genius: One of the leading Mercedes-Ben...

Recruitment Genius: Software Developer

£27500 - £35000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Telemarketers / Sales - Home Based - OTE £23,500

£19500 - £23500 per annum: Recruitment Genius: Experienced B2B Telemarketer wa...

Recruitment Genius: Showroom Assistant

Negotiable: Recruitment Genius: This global company are looking for two Showro...

Day In a Page

Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

Liverpool have seen too much tragedy to forget Heysel

Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor