The Bank of England forecast today that the British economy would avoid a double-dip recession, despite the impact of the government's severe deficit-slashing austerity measures.
The British central bank, releasing its key quarterly report, also warned that the outlook remained 'uncertain' for both economic growth and inflation.
The Bank of England forecast that growth would be 'broadly similar' to predictions in its previous August report, with the recovery peaking in the second half of 2010, before easing to an annual rate of 2.5% next year.
Annual inflation was forecast to hold above the bank's target level of 2% next year, after the looming increase in taxation on goods and services, but would fall back in the longer term.
'The considerable stimulus from monetary policy, together with a further expansion in world demand and the past depreciation of sterling, should support recovery,' the Bank of England said in the report today.
'Those factors are likely to encourage private sector spending and some rebalancing of the economy towards net trade. But the strength of the recovery is likely to be tempered by the fiscal consolidation and the reduced availability of credit,' the bank said.
The British central bank had last week held its key interest rate at a record low 0.5% and opted against following the US Federal Reserve with fresh injections of funds into the economy.
