BoE quarterly inflation report August 2008 update gloomy

Governor Mervyn King updated his latest forecast on growth and inflation in the UK. The bank expects growth now to come in lower than from the previous forecast. The UK economy is expected to grow by just 0.1pc in the first quarter of 2009 down from 1pc at its latest May projection. Inflation is expected to fall below its 2pc target within two years according to Mr. King's report. However, the Bank also warned today that inflation is likely to hit 5pc in the coming months, rather than the 4pc peak it was expecting earlier in the year.

"It may still be summer but there is a feeling of chill in the economic air," Mr King said at a press conference today. "This adjustment to our economy cannot be avoided. As a result, inflation is rising and growth is slowing."

This is what King had to say in May:
"The 'nice' decade is behind us," he said. "The credit cycle has turned. Commodity prices are rising. We are travelling along a bumpy road as the economy rebalances. Monetary policy cannot and should not try to prevent that adjustment. Inflation will return to the target and growth will eventually recover to a sustainable rate. But we will have to be patient."
click to enlarge

source: Bank of England slashes UK growth forecasts
By Angela Monaghan, The Daily Telegraph http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/13/bcnboe213.xml

read also:A smidgen of reality at the Bank of England Thursday,
May 15, 2008 http://manonthestreet64.blogspot.com/2008/05/smidgen-of-reality-at-bank-of-england.html