The Bank of England on Wednesday lifted its estimate for economic growth and forecast inflation to return to its 2 percent target earlier than projected.
In its Inflation Report, the bank forecast economic growth to accelerate to 0.5 percent in the second quarter from 0.3 percent in first quarter. However, it expects the recovery to be weak by historical standards and sees the main risks to the recovery from abroad.
The recovery is in sight and improved forecast is a welcome change, outgoing BoE Governor Mervyn King said.
The bank expects growth to pick up gradually over the next year or so, underpinned by past asset purchases, an easing in credit conditions aided by the Funding for Lending Scheme, and a continuing improvement in the global environment.
The Inflation Report suggests little scope for more stimulus given the upward revisions to growth outlook. The bank today said monetary policy remained highly stimulatory.
Inflation is forecast to edge higher over the coming months, before slowing with fading external price pressures. Inflation is estimated to peak at around 3 percent in the third quarter of this year.
But in two years' time, the central bank projects inflation to be around 2 percent, compared to the 2.3 percent estimated in February. It forecast inflation to average below 2 percent during the latter part of the forecast period.
This is the last quarterly estimates from Governor King as he retires at the end of the next month. He will hand over the charge to the current Bank of Canada Chief Mark Carney, who is more likely to provide long-term interest rate guidance.
Last month, the bank extended the Funding for Lending Scheme for one year. The scheme was originally launched in August 2012 to boost lending to households and businesses. King today said the FLS has largely achieved its objectives.
King's call for more stimulus at the February, March and April monetary policy meetings was overturned by a majority as they were concerned about the impact of easing on inflation expectations.
IHS Global Insight's Chief U.K. economist Howard Archer said he suspects that Carney will be keen to try and build up escape velocity from the economy's extended softness and will be keen to quickly establish his presence after arriving at the start of July.
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April 24, 2026 15:15 ET Economics news flow was relatively light this week even as the conflict in the Middle East continued, raising concerns for policymakers. In the U.S., spending data, initial jobless claims and pending home sales were the highlights. Business confidence in the biggest euro area economy was in focus in Europe. Inflation data from Japan gained attention in Asia.