Recession is 'deeper than expected'
The recession has been deeper than expected and the timing and strength of a recovery is "highly uncertain", the Bank of England has said.
Its latest quarterly inflation forecast revised down the outlook for the economy, predicting a 4.5% year-on-year decline at its lowest point - considerably worse than Chancellor Alistair Darling's Budget forecast last month of 3.5%.
Inflation - currently at 2.9% - is also set to fall below the 2% target and "more likely than not" to remain below it in the medium term, the Bank added.
Bank of England Governor Mervyn King said "the economy will eventually heal, but the process may be slow".
The Bank said its predictions for the depth of the recession were weaker than its last report to reflect a worse than expected 1.9% decline in the economy during the first quarter of 2009.
It said the new forecast was also based on "a judgment that it is likely to take longer for bank lending to return to normal than assumed in February".
The Bank said the outlook for the UK economy "continues to be dominated by opposing forces".
It warned that the woes of the banking system and weakening global demand would continue to act as a "significant drag", although factors such as the pound's weakness, Government spending plans and the drastic action taken by the Bank on interest rates and boosting the money supply would "push in the opposite direction".
Share
