The U.K.’s central bank has lowered its forecasts for growth in the coming years due to slowing economic activity and government austerity measures, along with inflation that will likely remain high for some time, according to Financial Times. On Wednesday, the Bank of England reduced its forecast for growth to a 2.7% expansion during 2011 and a 2.8% expansion the following year. The figures are down from the bank’s previous estimates of 2.9% and 3.2%, respectively.
The bank’s governor, Mervyn King said the revision was due to “broadly flat” economic growth during the last two quarters, although he called the lull a “temporary soft patch.” King asserted that the “big picture is broadly the same,” and pointed to weaker contributions from trade and consumer spending than had been anticipated. The report also outlined a forecast for inflation to reach as high as 5% this year, up from a peak forecast of 4.5% in February, and is now only expected to have eased to 2.4% by the end of 2012. Jonathan Loynes of Capital Economics argued that the tone of the report “seemed to endorse expectations of some policy tightening” by the central bank before the end of the year.