Mervyn King has reduced the UK’s growth forecast for 2011 to 2.5%.
Mervyn King has slashed the Bank of England’s growth forecast for 2011and warned that banks will be reluctant to loan money for “many years”.
The Bank had forecast growth of 3.4% for 2011, but it has now reduced its forecast to 2.5%. It also said inflation will stay higher for longer than previously forecast.
Announcing the cut, Mervyn King, the governor of the Bank of England, warned that the UK economy faces a “choppy recovery” over the next two years. He added that the reduced growth was partly due to a lack of bank lending.
King said: “It will take many years before bank balance sheets and fiscal positions return to anything like normal. In the meantime they will act as headwinds to the recovery.”