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The Governor of the Bank of England Mervyn King has issued his quarterly forecasts and it doesn't make happy reading. Notably, he has downgraded the UK's forecast economic growth and also said that inflation has not reached its peak.

The Bank estimates that Britain's economy will grow by 1.7% during 2011, less than the 2% in February's forecast of 2% growth but the same as the latest forecasts from the government's independent Office for Budget Responsibility (OBR). In 2012, GDP is forecast at 2.2%, reduced from an earlier estimate closer to 3%. This is weaker than the OBR's forecast of 2.5% economic growth.

Inflation will probably peak in the second half of 2011 at 5%, according to the forecast. It will also likely remain significantly above the government's target rate of 2% in 2012.

The key to rising inflation, say the Bank of England, are increases in the cost of living and especially rises in fuel prices, and the increase in VAT. The bank also warned that there was a great deal of uncertainty in the forecasts because of instability in the international economy and fluctuating commodity markets.

The only flicker of good newes for landlords lies with interest rates. Despite high inflation, Mervyn King remarked that higher interest rates would not likely help lower inflation. It looks like base rates will be staying rock bottom out until the end of 2011, at the very least.

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By Dan
12 Aug 2011

Categories: Property Rentals



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