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| Bank of England's Sir Mervyn King says recovery in sight | Bank of England's Sir Mervyn King says recovery in sight |
| (about 1 hour later) | |
| The UK economy has "cause for optimism", the governor of the Bank of England has said. | The UK economy has "cause for optimism", the governor of the Bank of England has said. |
| Sir Mervyn King, presenting the Bank's latest >Quarterly Inflation Report, 20 years after it issued its first one, said "a recovery is in sight". | |
| But he said the outlook for inflation had worsened since November. | But he said the outlook for inflation had worsened since November. |
| He now expects the inflation rate, currently 2.7%, to rise to at least 3% by the summer and to remain above the Bank's 2% target for two years. | He now expects the inflation rate, currently 2.7%, to rise to at least 3% by the summer and to remain above the Bank's 2% target for two years. |
| The Bank's last report in November said that inflation would fall back towards its 2% target in the second half of this year. | The Bank's last report in November said that inflation would fall back towards its 2% target in the second half of this year. |
| Sir Mervyn said that factors outside of the Bank's control - increases in university tuition fees and utility bills - had added to inflation recently. | Sir Mervyn said that factors outside of the Bank's control - increases in university tuition fees and utility bills - had added to inflation recently. |
| "If you like, it is a bit of a self-inflicted goal in terms of the damage done to real take-home pay, perhaps another way of trying to implement fiscal consolidation through moving up the price level," he said. | "If you like, it is a bit of a self-inflicted goal in terms of the damage done to real take-home pay, perhaps another way of trying to implement fiscal consolidation through moving up the price level," he said. |
| "This is not the result of easy monetary policy and nor does it reflect what's going on in the economy." | "This is not the result of easy monetary policy and nor does it reflect what's going on in the economy." |
| He drew parallels between now and when the Bank's first inflation report was presented in 1993. | He drew parallels between now and when the Bank's first inflation report was presented in 1993. |
| "[In February 1993] unemployment had just reached its peak. Although we didn't know it at the time a recovery was on its way. | "[In February 1993] unemployment had just reached its peak. Although we didn't know it at the time a recovery was on its way. |
| "[Today] there is cause for optimism. Today too a recovery is in sight." | "[Today] there is cause for optimism. Today too a recovery is in sight." |
| 'Encouraging' picture | 'Encouraging' picture |
| The economy shrank by 0.3% in the last three months of 2012, fuelling fears that the UK could re-enter recession, defined as two consecutive quarters of contraction. | The economy shrank by 0.3% in the last three months of 2012, fuelling fears that the UK could re-enter recession, defined as two consecutive quarters of contraction. |
| Although economic output has been broadly flat for the past two years, Sir Mervyn said that masked "a more encouraging underlying picture". | Although economic output has been broadly flat for the past two years, Sir Mervyn said that masked "a more encouraging underlying picture". |
| Manufacturing and services - which make up the bulk of the economy - had grown during 2012, seeing a similar performance to that in the US and considerably stronger than in Japan and the eurozone, he said. | Manufacturing and services - which make up the bulk of the economy - had grown during 2012, seeing a similar performance to that in the US and considerably stronger than in Japan and the eurozone, he said. |
| The weakness in overall output reflected falls in construction, which is "unlikely to be repeated in 2013". | The weakness in overall output reflected falls in construction, which is "unlikely to be repeated in 2013". |
| "Growth is likely to be weak in the near term but further out a continued easing in domestic credit conditions, supported by the Bank's asset purchase programme and the Funding for Lending Scheme, together with the stronger global backdrop, underpin a slow but steady recovery in output," the governor said. | "Growth is likely to be weak in the near term but further out a continued easing in domestic credit conditions, supported by the Bank's asset purchase programme and the Funding for Lending Scheme, together with the stronger global backdrop, underpin a slow but steady recovery in output," the governor said. |
| Sir Mervyn was delivering his penultimate Inflation Report. His last Report will be in May, before he is replaced by Mark Carney as governor in the summer. |