Bank warns of slowdown

THE BANK of England is this week expected to downgrade its growth forecast for the year and predict low inflation for another two to three years.<br /><br />The revision &ndash; which results mainly from a weaker-than-expected second quarter gross domestic product &ndash; will push the growth rate below chancellor Alistair Darling&rsquo;s predicted rate of 3.5 per cent shrinkage.<br /><br />The Bank, which only last week announced a &pound;50 billion expansion of its quantitative easing programme, will warn that recovery will be slow, hampered by the continued weakness of bank lending.<br /><br />The forecast is likely to mean the Bank rate will stay at 0.5 per cent until well into next year.<br /><br />The Bank&rsquo;s gloomy prediction will be reinforced by official unemployment figures due on Wednesday. They are expected to show around 25,000 more people began claiming unemployment benefit last month and that the Labour Force Survey jobless measure rose by about 250,000 over the last three months.<br /><br />A survey of employers by the Chartered Institute of Personnel and Development is this week expected to reveal an improvement in employment prospects, particularly among private-sector employers. However it is also likely to paint a grim picture for public-sector employees, with predictions of a possible second round of redundancies over winter if the economy remains weak.<br /><br />Economic consultant Fathom expects a more optimistic outlook, saying: &ldquo;Although we expect the second quarter to mark the trough in the decline in annual growth, we do not expect to see it return to positive territory until well into 2010."