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The Chancellor George Osborne said the Governor of the Bank of England is "right on the big picture" in his growth forecasts for 2012. He insisted the economy is "healing" but said it was a "slow and difficult process" that involves "deep rooted problems at home" as well as as from abroad.
The chief economist of PwC said the Bank of England's prediction of no GDP growth this year is historic.
Labour MP Rachel Reeves said today's inflation report by the Bank of England which slashed growth predictions from 0.8% to 0% showed the government must accept their plan 'A' to cut the deficit and stimulate growth is not working. She said:
"The economy has now shrunk over the last two and a bit years, since the coalition came to power, unemployment is higher since the coalition came to power and the deficit has actually increased."
ITV Business editor Laura Kuenssberg asked the Governor of the Bank of England Sir Mervyn King should the public accept that the recovery was not going to take hold and get used to being poorer.
He said the UK will get back to the same levels of growth experienced before the crisis, but that it was "quite impossible to know over what time period."
King also said that it was important to bear in mind that although the crisis started five years ago, the policy measures taken at the time meant that the impact on spending was reduced. This is no longer the case.
TUC General Secretary Brendan Barber said the Bank of England's quarterly inflation report showed the government must "call time on self-defeating austerity" and look for new ways to get the economy growing. He said:
"We all know the economy is currently stuck in a rut but it’s now looking less like a blip and more like a much longer slump.
The UK’s dire economic performance is causing permanent damage and putting thousands of jobs on the line. It is not good enough for the Chancellor to stand by and rely on the Bank’s monetary policy measures to get us out of this mess.
With all the main forecasts now pointing towards a lost decade, it’s time for the government to call time on self-defeating austerity and start looking at ways to stimulate the economy."
The Governor of the Bank of England Sir Mervyn King has the crisis in the euro area is continuing to hit demand for UK exports and efforts to rebalance the economy "will require patience." He said:
"GDP growth is more likely than not to be below its historical average rate in the second half of the forecast period.As I have said many times, the recovery and rebalancing of our economy will be a long, slow process."
The Bank of England's latest inflation report shows the clear need for "stimulus measures" including quantitative easing to get the economy growing again, according to Capital Economics chief UK economist Vicky Redwood:
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The Bank of England has slashed growth forecasts from 0.8% to 0% and has admitted the road to recovery will be long and slow.