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The Governor of the Bank of England explained why inflation would fall back towards the Government's 2% target later than expected. Student tuition fees and rises in energy bills were partly to blame.
The Bank of England Governor says that despite a resilient labour market, the economy has barely grown over the past two years.
Sir Mervyn King said: "The unexpected weakness reflects the impact of the euro area crisis and its effect on confidence and bank funding costs - and the sharp squeeze on real incomes from higher-than-expected world energy and food prices."
Bank of England expects inflation to fall back towards the Government's 2% target in the second half of 2013 - later than previously thought.
The Bank of England has downgraded its growth forecast for 2013 to around 1% as it warns output will remain below pre-financial crisis levels for the next three years.
Latest ITV News reports
Economic growth will remain below pre-financial crisis levels for the next three years at least, the Bank of England governor warned today.