17th November 2011
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The prospects for the UK economy have worsened.  Global demand slowed.  And concerns about the

solvency of several euro-area governments intensified, increasing strains in banking and some

sovereign funding markets.  Household and business confidence fell, both at home and abroad.

These factors, along with the fiscal consolidation and squeeze on households’ real incomes, are

likely to weigh heavily on UK growth in the near term.  Thereafter, the recovery should gain traction,

supported by continued monetary stimulus and a gentle recovery in real incomes.  Implementation

of a credible and effective policy response in the euro area would help to reduce uncertainty and so

support UK growth, but its absence poses the single biggest risk to the domestic recovery.

CPI inflation rose to 5.2% in September.  Inflation is likely to fall back sharply through 2012 as the

contributions of VAT, energy and import prices decline, and downward pressure from slack in the

labour market persists.  But how far and how fast inflation will fall are uncertain.  Under the

assumption that Bank Rate moves in line with market interest rates and the size of the asset

purchase programme remains at £275 billion, inflation is judged more likely to be below than above

the 2% target at the forecast horizon.

To read the full article click HERE!

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Thebestof L

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