This article was last updated on April 16, 2022
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The Governor of the Bank of England (BoE) Mark Carney has said on Wednesday, there is strong likelihood that inflation will drop below 1% in next six months, and economic growth will be slower than expected.
Surprisingly, inflation has fallen rapidly to a five-year low of 1.2 per cent, and the BoE said the outlook for inflation had also weakened due to a sharp drop in commodity prices.
The central bank has anticipated if it raised interest rates as per expectations of the market, inflation was still likely to be just below its 2 per cent target in two years’ time.
The BoE quarterly Inflation Report states: “Inflation is expected to remain below the target in the near term, and is more likely than not to fall temporarily below 1 per cent at some point over the next six months.”
Mr Carney has said: “A spectre is haunting Europe – the spectre of economic stagnation, with growth disappointing again and confidence falling back.”
He talked about the expectations that he would have to write to the Chancellor in the next six months to explain the cause behind the fallen inflation rate below 1%.
The Bank cut its UK gross domestic product (GDP) forecast for next year from 3% to 2.9%, although it still expects 3.5% growth for this year.
However, an end to the six-year squeeze on living standards is also forecasted, with real terms wage growth rising from around zero currently to reach about 2% by the end of year 2015. Pay has been lagging behind inflation since 2008.
The official figures revealed by the Office for National Statistics (ONS) have also indicated that unemployment in the U.K. fell by 115,000 in the three months to the end of September, to a total of 1.96 million.
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