Scottish Daily Mail

Recession prediction was wrong, admits Bank

- By John-Paul Ford Rojas Associate City Editor

THE Bank of england yesterday admitted it had been wrong to forecast a recession as it unveiled a record upgrade in its prediction­s for the size of the economy.

Governor Andrew Bailey said the economy had shown ‘greater resilience’ than expected, which has banished fears of a prolonged downturn.

however, the Bank now fears inflation will take longer to come down as food price rises are sharper and more persistent than feared. Mr Bailey said: ‘Six months ago, we were expecting a shallow but long recession.’ Since then, energy prices have fallen and the outlook has been boosted by more help with household bills and a business investment tax break as part of the Budget.

‘We are forecastin­g modest but positive growth, and a much smaller increase in unemployme­nt.’ The Bank predicts the economy will be 2.25 per cent bigger in three years than it predicted just three months ago. It is the biggest upgrade since it started publishing quarterly forecasts in 1997.

The economy is on course to recover to pre-pandemic levels by the end of this year – much earlier than previously thought.

Growth still looks set to be slow and is forecast to hit just 0.25 per cent this year and 0.75 per cent in 2024 and 2025. In November the Bank had predicted an historic eight-quarter long recession stretching into 2024.

The Bank unveiled its forecast as it announced its twelfth interest rate hike in a row to combat inflation, from 4.25 per cent to 4.5 per cent. Spiralling food prices have caused a setback in the predicted fall inflation, which stands at 10.1 per cent.

It now predicts food prices will keep rising for the next year. As a result it think inflation will be 5.1 per cent at the end of this year, up from a forecast of 3.9 per cent.

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