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BoE sees a modest and sustained recovery over the next three years

FXstreet.com (Barcelona) - The quarterly Inflation Report released by the Bank of England on Wednesday suggests that UK inflation should rise above 3% in June and that it will possibly remain above the 2% target for the next two years.

As for the GDP, it is “likely to pick up gradually over the next year or so, supported by past asset purchases, an easing in credit conditions aided by the Funding for Lending Scheme, and a continuing improvement in the global environment.”

The BoE MPC expects GDP growth of 0.3% in the first quarter of 2013. In the current quarter they see quarterly GDP expanding by 0.5%, while year-on-year GDP is projected to grow by 2.2% (compared with the previous forecast of 2%). Nevertheless, the MPC recognizes that the recovery is still “weak and uneven.”

The report states that in the light of the growth and inflation forecasts more stimulus might be required. No rate hike should be carried out before 2016 however.

Following the release of the report, BoE Governor Mervyn King presented it at a press conference. He pointed out that there are many obstacles on UK's road to recovery, the most important being the Eurozone crisis and rising unemployment. He stressed that UK policymakers should continue their efforts to boost the recovery as “this is no time to be complacent.”

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