World Economic outlook - MPC UK economic, inflation rate forecast 2012 : The Bank of England’s Monetary Policy Committee (MPC) released the minutes from their January rate-setting meeting which reveal that the MPC sees inflation falling to the target of two per cent by the end of 2012 and that it is likely to introduce a further round of quantitative easing next month.
The MPC also reported that they believe the actions of the European Central Bank (ECB) has reduced the risk of a “severe dislocation” to the European banking system. The minutes said: “The three-year long-term repo operation by the ECB on 21 December 2011 had improved market sentiment.”
This means that banks had increased the amount of money they were willing to lend and has reduced the possibility that the euro debt crisis will adversely affect the European banking system.
The Office for National Statistics (ONS) today released its first estimate of GDP in the UK in the final quarter of 2011 which showed the UK economy contracted by 0.2 per cent, increasing the likelihood that the UK would fall back into recession in 2012.
Similarly, a new report out today by the International Monetary Fund (IMF) on the prospects for the global economy reports revised lower estimates for most major economies. Growth for the UK in 2012 has been revised down to just 0.6 per cent. The main risk to the UK economy is still seen as coming from the euro debt crisis.
UK economic growth outlook for 2012
Healthier economic reports in December did not do enough to stop the UK economy contracting in the fourth quarter but did give the MPC hope that there were grounds for optimism for the first quarter of 2012.
An extract from the minutes said: “If the output indices were to remain at their December levels over the coming months, this would point to a modest pickup in growth in the first quarter of 2012.”
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