12 Aug 2010

Growth forecast downgraded for UK

6:02 am on 12 August 2010

The Bank of England has downgraded its forecast for economic growth and says inflation will fall more slowly than expected.

At a meeting in London, Governor Mervyn King said growth is likely to be weaker than earlier anticipated.

The Bank now expects the economy to grow by less than 3% in 2011, down from its previous forecast of nearer 3.5%.

Mr King also warned that following an "unprecedented" period, the British economy faced a difficult rebalancing "away from private and public consumption and towards net exports," which could also hit economic growth.

Earlier, the Federal Reserve announced that economic expansion is slowing in the United States.

It will use proceeds from its investments in mortgage securities to buy longer-term government debt.

The BBC reports the move means that the Fed will maintain the size of stimulus spending programme, pumping in money to try to bolster the economy.