At the same time, Mervyn King, the Bank’s Governor, announced a cut in its UK growth forecast for this year, from 1.8% to 1.5%, adding that headwinds facing the economy are getting “stronger by the day”.
These headwinds, he went on to say, are largely coming from the US and Europe, adding that the imbalances in the world economy are still not being properly addressed and that it will take a number of years before they are resolved.
During yesterday’s press conference to announce his quarterly inflation report held yesterday, King gave his forecast for inflation to hit 5% though he went on to say that it would fall in 2012. For next year, he expects GDP growth to be around 2%, compared to 2.5% predicted by the Office for Budget Responsibility.
He would not be drawn into following the Federal Reserve’s lead by committing to keep interest rates at their current low level until 2013.
