GDP growth for the first quarter of this year was estimated at 0.5 per cent, and for the whole of 2011 it is expected to be 2.7 per cent, down from the February forecast of 2.9 per cent
The Bank of England has cut its growth projections and increased its inflation forecast in its Inflation Report, released today.
GDP growth for the first quarter of this year was estimated at 0.5 per cent, and for the whole of 2011 it is expected to be 2.7 per cent, down from the February forecast of 2.9 per cent. Growth for 2012 is expected to be 2.8 per cent, 0.4 per cent lower than February’s forecast. The Bank said that high energy prices, low household consumption and fiscal consolidation were dragging down growth rates.
According to the bank’s projections, inflation is likely to reach 5 per cent this year, and is unlikely to fall below the Bank of England’s 2 per cent target before the end of 2012. The report said that higher energy and import prices and the increase in VAT were likely to continue to push up the CPI and erode real wages.
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Bank of England governor Mervyn King said that the outlook for growth and inflation is likely to remain ‘unusually uncertain’ as the UK economy rebalances.
He added that the Bank of England is determined to return to its 2 per cent inflation target in the medium term, but it is not increasing its bank rate, currently at 0.5 per cent.
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