LONDON: The Bank of England forecast on Wednesday that the British economy would experience a "slow but sustained" recovery, but 12-month inflation would top 3.0 percent in the summer months.
Gross domestic product (GDP) was expected to grow by about 2.0 percent by the end of 2014 and remain positive despite some volatility amid the ongoing eurozone crisis, the central bank said in its latest quarterly report.
"The UK economy is therefore set for a recovery," said BoE governor Mervyn King, who will be replaced by Canadian central bank boss Mark Carney in July.
"That is not to say that the road ahead will be smooth. This hasn't been a normal recession and it won't be a normal recovery.
"The bank does not expect a triple-dip recession but said GDP was likely to continue at below pre-financial crisis levels for around another two years."
The BoE report will likely ease concerns over the outlook, after a 0.3-percent contraction in the fourth quarter of 2012 left Britain on the brink of its third recession since 2008.
The bank's monetary policy committee (MPC) last week froze its key interest rate at a record-low 0.50 percent and maintained its quantitative easing cash stimulus.
In addition, last year Britain launched an £80-billion ($123.7 billion, 102 billion euros) "funding for lending" initiative -- which is aimed at providing banks with cheap funding to stimulate lending to households and businesses, and thereby boost growth.
"The MPC continues to judge that the UK economy is set for a slow but sustained recovery in both demand and effective supply, aided by a further easing in credit conditions -- supported by the bank's programme of asset purchases and the funding for lending scheme -- and some improvement in the global environment," the report said.
"But the risks are weighted to the downside, not least because of the challenges facing the euro area."
The British central bank added that household budgets would be squeezed further, with 12-month inflation set to strike 3.0 percent in the coming months and hold above its official 2.0-percent target level for another two years.
Official data had shown on Tuesday that consumer prices index (CPI) annual inflation was 2.7 percent in January for the fourth month in a row, driven partly by rebounding food and drink prices.
- AFP/al
Bank of England says UK economic recovery in sight
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Bank of England says UK economic recovery in sight
