BOE sees rise in GDP and prices | Shanghai Daily

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November 12, 2009

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BOE sees rise in GDP and prices

THE Bank of England raised its forecasts for economic growth and inflation yesterday, but warned that Britain's economic recovery is just beginning and that its strength remains "highly uncertain."

BOE Governor Mervyn King said the bank's moves to slash interest rates and pump money into the economy, increased spending by the government and the depreciation of the British pound were likely to drive a recovery.

In its quarterly inflation report, the bank predicted the gross domestic product will return to growth by the beginning of next year, and expand by about 3.75 percent by the end of 2011 - faster than it had forecast in August.

King said at a press conference after the report's release that he expects last month's data showing Britain was still officially in recession to be revised upward.

The report also predicted inflation would rise sharply above the bank's 2 percent target in the short term, but that it would fall below target in two years if interest rates rise gradually from the middle of next year as markets expect.

But King cautioned that Britain has "only just started on the road to recovery and the adjustment to balance sheets still has much to run."

"Despite a recovery in economic growth, output is unlikely, at least for a considerable period, to return to a level consistent with a continuation of its pre-crisis period," he said.

The BOE slashed interest rates to the current record low of 0.5 percent and spent 200 billion pounds (US$333 billion) to purchase assets.




 

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