Finance News

Bank of England looks set to cut UK growth forecast

The Bank of England are getting ready to downgrade their forecast for growth in 2012, reducing the economic outlook of the UK further still. Previously, there had been some indications that 2012 might see growth overall, despite the double dip recession that Britain is currently experiencing.

However, the next quarterly report from the BoE is due out tomorrow, and it’s expected to bring more bad news with it. With the last official figures showing a dramatic 0.7% drop in the economy for the period from May through July, many analysts have been revising down their forecasts for the rest of the year, a trend the Bank of England will not be able to avoid.

It’s believed that the bank will now predict no or very little growth in 2012, having previously indicated that 2012 would be the year that economic recovery really began to take hold. The bank will probably now take a view similar to the National Institute for Economic and Social Research, who have said they “do not expect output to pass its peak in early 2008 until 2014.”

However, in some good news, inflation rates are also likely to drop, and the bank’s latest report is expected to indicate that will be the case as well. That means that living costs will stop rising as quickly, and people may find that if their incomes increase faster than inflation they will end up better off.

Still, with the eurozone crisis going on, any long term forecasts can’t be relied on, and this forecast, which focuses on the next six months, will mostly be bad news. Howard Archer, the chief UK and European economist for global economic forecasters HIS Global Insight, believes it will “acknowledge that the economy has taken a significant turn for the worse and currently faces a worrying and uncertain outlook”.