The Bank of England has cut its growth forecast for this year to 0.8 per cent from 1.2 per cent warning that the eurozone crisis is still the main threat to recovery.
The Bank’s latest inflation report, also says inflation, currently at 3.5 per cent, will not fall as quickly as previously thought and will remain above the 2 per cent target “for the next year or so”.
Bank governor Mervyn King says: “The outlook for growth presented in today’s report is weaker than in February, and the outlook for inflation is higher in the near term. Rather than focusing on quarter to quarter movements in output or inflation, which are impossible to judge, the MPC focuses on the bigger picture. That bigger picture is of a gradual recovery in output, and of subdued domestic cost pressures meaning that inflation is likely to fall back as external influences fade.
“The biggest risk to the recovery stems from the difficulties facing the euro area, our main trading partner.”