Bank of England expected to cut UK growth forecasts

The quarterly inflation report is likely to indicate no growth for 2012 compared with 2% predicted a year ago reports The BBC.

Governor Sir Mervyn King is expected to be asked about a possible interest rate cut from the current record 0.5%.

Presenting his last report in May, he said the UK would not be “unscathed” by the eurozone “storm”.

The UK recession deepened between April and June, with output falling by 0.7%, official data released at the end of July showed.

The Office for National Statistics said the bigger-than-expected contraction, which followed a 0.3% drop in the first three months of the year, was largely due to a sharp slowdown in the construction sector.

BBC economics editor Stephanie Flanders said many in the City would be bracing themselves for bad news on Wednesday morning when they opened the Bank’s latest quarterly report.

She said that, when it drew up its last forecasts, it was expecting the economy to do poorly in the first half of the year – but not shrink by more than 1%.

And the Bank thought the UK economy would get bigger, not smaller, over the course of 2012 but that now looked increasingly unlikely, she added.