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Is the Bank of England out of touch with growth forecasts for 2011?

A survey of economists and analysts in the UK has today cast doubt on the assumption that the UK economy will grow by 3.4% in 2011. The general feeling now is that the UK economy will grow by no more than 2.5% which is a significant difference to the current forecast. So how has the Bank of England got it so wrong?

The current economic growth forecast in place at the Bank of England was formulated some time ago when the UK economic situation was perhaps a little brighter. Whether or not the Bank of England was overoptimistic at the time is a matter of debate but over the last few weeks we have seen further events in the UK and around the world which have placed more pressure on the UK economy. As a consequence, when the Bank of England does review its forecast for next year, we are likely to see a significant reduction but in reality many analysts and economists are expecting this already.

There is no doubt that the Bank of England is the leading light in the UK with regards to economic forecasts but these can only be made on the information available at the time and as we know, the current situation is as volatile as anybody has ever known it.

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