Bank of England upbeat on growth outlook

15th May 2013, Comments 0 comments

The Bank of England forecast on Wednesday that British economy would grow faster than expected in the coming months, but stressed the weak nature of the recovery.

Growth in Gross domestic product (GDP) was expected to strengthen to about 0.5 percent in the second quarter of 2013, but the recovery would be uneven, the central bank said in its latest quarterly report.

The BoE also forecast that annual inflation would likely peak at 3.2 percent in the summer, but would probably not fall below its 2.0-percent target level until early 2016.

Bank governor Mervyn King, presenting his last report before he hands over the reins to Canada's Mark Carney in July, told reporters that growth would be "a little stronger" than predicted in February.

"Of most significance today is that there is a welcome change in the economic outlook," King said at a press conference unveiling the report.

"Today's projections are for growth to be a little stronger and inflation a little weaker than we expected three months ago.

"That is the first time I have been able to say that since before the financial crisis. But this is no time to be complacent - we must press on to ensure a recovery and bring down unemployment."

Recent data showed that the economy -- which has been hit hard by state austerity measures and the eurozone debt crisis -- escaped from falling into its third recession since the 2008 global financial crisis.

British GDP rebounded by 0.3 percent in the first quarter of 2013, after shrinking 0.3 percent in the fourth quarter of 2012. A recession is defined as two straight quarters of contraction.

That meant the British economy was essetially flat over the six-month period.

Wednesday's report was published as the European Union's statistics arm Eurostat revealed a sixth consecutive quarter of economic contraction in the 17-nation eurozone, meaning that it has now been in recession for a full year-and-a-half.

The BoE's report also came a week after the central bank voted to maintain record-low interest rates at 0.50 percent and refrain from pumping out more quantitative easing stimulus cash.

Prior to this month's meeting, however, King has called repeatedly for more QE funds to stimulate growth and fend off the threat of recession.


© 2013 AFP

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