Bank of England Slashes Growth Prediction to Zero, Slams Austerity

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The Bank of England in Threadneedle Street, Lo...

The Daily Banter headline grab (from the Independent):

The Bank of England today appeared to rule out an early cut in interest rates to boost the flagging economy despite slashing its growth forecasts for this year to zero.

In its quarterly inflation report, the Bank admitted that it now expected the economy to grind to a halt in 2012 – compared to its prediction in May of 0.8 per cent growth.

But the Governor of the Bank of England suggested it was not considering cutting interest rates further from their current historic low of 0.5 per cent warning that the move could be “more counterproductive than beneficial”.

Announcing its revised forecasts Sir Mervyn King blamed the crisis in the eurozone, which he described as “a saga that goes on, and on, and on”, as the main cause of the slowdown.

But he also said the Government’s tough austerity measures had been a drag on growth. He added that the extra bank holiday in June for the Diamond Jubilee celebrations had reduced output by around 0.5 per cent.

“The underlying picture is that output has been at best broadly flat over the past two years, and has continually disappointed,” he said.

“The overall outlook for growth is weaker than in May reflecting downside news in the near term and, in the medium term, the possibility that the weakness in output and productivity growth that we have seen since the financial crisis persists.”

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