BoE pessimistic about UK economy
11th August 2010
The Bank of England forecast for UK economic prospects has been revised to reflect less optimism.
Governor Mervyn King said a "choppy" recovery is ahead due to persisting banking sector problems, the recent Budget of cuts by Chancellor George Osborne and rising rate of inflation.
Inflation will keep increasing for the rest of 2010, and throughout 2011, and will be fuelled by the 20% rate of VAT being introduced at the beginning of the new year, despite the bank's intention to keep inflation at just 2%.
Ordinary people will continue to suffer while the banks restrict lending, the forecast added. All the signs indicate that income protection cover may be a wise move for some workers.
Reports from other bodies have noted sharply reduced sales activity on the high street, with retailer revenue falling dramatically, and that property values are shrinking.
Mr King said enduring problems in the banking sector are guaranteeing that any recession recovery will happen slowly, adding that the incomes of ordinary households will continue to fall. Worries about job losses and frozen wage levels have fed into the pessimism.
The bank said it may be forced into taking some form of action if rising inflation does not level out.
Copyright © Press Association 2010
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