LONDON (TheStreet) -- The Bank of England said it expects that the U.K. recovery will continue but at a slower pace than it had previously forecasted.
In its quarterly inflation report, the Bank of England said that the "most likely outcome for GDP growth is lower than in the May report, reflecting the softening in business and consumer confidence, the faster pace of fiscal consolidation and a slower improvement in credit conditions."
The central bank noted that the downside risks around this projection are judged to be smaller than in its May quarterly inflation report.
The Bank of England said that CPI inflation in June was 3.2%, above the 2% inflation target, which suggests that "inflation in the near term was likely to be higher than anticipated in the May report."
Inflation is "likely to remain above the 2% target for longer than judged likely" in the central bank's previous report, reflecting the increase in the rate of VAT to 20% in 2011. The report added that inflation is likely to fall below the 2% target in 2012, although the Monetary Policy Committee said it cannot be sure of the extent to which inflation will moderate.
-- Written by Robert Holmes in Boston
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