- UK economic growth likely to be just 1.7% in 2011
- Inflation likely to hit 5% in the coming months
- Mervyn King admits outlook has darkened since last report
Graeme Wearden, guardian.co.uk
Wednesday 11 May 2011 13.43 BST
The Bank estimated that Britain will grow by around 1.7% during 2011, down from February’s forecast of 2% growth and in line with the latest forecasts from the independent Office for Budget Responsibility.
In 2012, GDP is expected to be around 2.2%, down from an earlier estimate of close to 3%. This is weaker than the OBR forecast of 2.5% growth.
On inflation, King said that higher commodity and import prices, and the increase in the standard rate of VAT, was pushing up the cost of living more rapidly than expected in February. He said that higher utility bills were likely to drive the consumer prices index (CPI) up to 5% this year. CPI, which fell back to 4% last month, was likely to remain above the 2% target until the end of 2012, the Bank predicted. Three months ago it had forecast that CPI would drop back to 2% next year.