– Ed Balls MP, Shadow Chancellor
This sobering report shows why David Cameron and George Osborne's deeply complacent approach to the economy is so misplaced. Their failing policies have seen two years of almost no growth and the Bank of England is now forecasting lower growth and higher inflation than just a few months ago. The complacent thing for the Government to do now is simply sit back and hope things will get better, but the cautious approach would be to act now to secure and strengthen our economic recovery. Britain needs a plan to create the jobs and growth we need to get deficits down.
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."
– Sir Mervyn King, Bank of England Governor
Growth in Q3 [third quarter] has been boosted by one-off factors and gives an over-optimistic impression of the underlying trend. Continuing the recent 'zig-zag' pattern, output growth is likely to fall back sharply in Q4 [forth quarter] as the boost from the Olympics in the Summer is reversed. Indeed, output may shrink a little this quarter.
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.