The Bank of England has lowered its forecast for economic growth and has raised its inflation expectations in its Quarterly Inflation Report released today. The news may add weight to the views of some experts who fear a double dip recession as a result of downward revisions.
The Bank now expects the economy to grow at less than 3% in 2011, down from its previous forecast of 3.5%. It also expects inflation to stay higher for longer than expected, mainly due to the increase in VAT which will take effect from the start of next year.
In a stark warning the Governor of The Bank of England predicted that it would be “several years” before the economy adjusts “back to anything we can call remotely normal”. He went on to say that a lack of lending by UK banks would “act as a headwind” against recovery. However he did highlight some positive aspects to the UK economy such as the continuing economic stimulus measures and the fall in the value of the pound.
The news from the Bank came on the same day that unemployment fell again, by 49,000 in the three months to June.
Continued high inflation and low interest rates represent challenging conditions for savers who are struggling to get a return on their savings above the current levels of inflation.
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