Bank of England Governor Mervyn King said inflation will probably slow below the bankÃ¢â‚¬â„¢s target in 2012 and growth will be weaker than previously forecast, signaling the U.K. economy may need more emergency stimulus.
Inflation will be about 1.5 percent in two years, below the 2 percent goal, the central bank said in its quarterly Inflation Report today. Inflation will undershoot the target even if the bank keeps its benchmark interest rate at the current 0.5 percent, the forecasts show. Growth may peak at a 3 percent annual pace instead of the 3.6 percent rate forecast in May.
Ã¢â‚¬Å“The overall outlook is weaker than that presented in the May inflation report,Ã¢â‚¬Â King said at a press conference in London. He cited the Ã¢â‚¬Å“persistence of tight credit conditionsÃ¢â‚¬Â and planned budget cuts as risks to growth.
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