The Bank of England has predicted that the UK economy will experience no growth whatsoever in 2012, as the nation’s bank revised its growth forecast again.
Last year the Bank of England predicted that UK output would increase by 2% in 2012, which it lowered again to an estimate of 0.8% in May. Growth forecasts for the economy in 2013 have been revised down as well from 2.4% in May to 1.9%.
The grim news about the UK’s economy was delivered in a speech by Sir Mervyn King, Governor of the Bank of England which published its quarterly inflation report today. During his speech Sir Mervyn said that the underlying picture had been ‘broadly flat’ over the past two years and has ‘continually disappointed’ expectations of a recovery.
Bad news about the economy is the last thing the country needed; the UK is stuck deep in the worst double dip recession it has experienced in over 50 years. The report by the bank said: ‘The level of GDP has been broadly unchanged since the middle of 2010. And forward-looking survey indicators suggested that growth in Q3 was likely to be weaker than embodied in the MPC’s May 2012 projections.’
The BoE lowered the base rate of interest to a record low of 0.5% in March 2009, where it has firmly stayed since. The lower interest rate gave borrowers of loans and mortgages a little more breathing space in the financially tight time. Despite predictions by many for the base rate to be lowered even further before the year is out, Sir Mervyn has pretty much rules this out by stating that a rate cut was not a move the Bank would ‘contemplate immediately’ as it would damage some financial institutions, and ‘would therefore be counter-productive, which is precisely why we haven’t done it’.
Howard Archer, chief UK and European economist at IHS Global Insight, said: ‘The consumer price inflation forecasts suggest that more stimulative action by the Bank of England is probable.
‘We certainly would not rule out a future trimming of interest rates from 0.50 per cent to 0.25 per cent, but we believe it is more likely that they will stay at 0.50 per cent through until at least late-2014. Vicky Redwood, chief UK economist at Capital Economics, said: ‘The door is clearly open to more stimulus and we still expect both more QE and a further interest rate cut in November.’