King downgrades growth forecasts

The UK economy faces a "choppy recovery" over the next two years Bank of England Mervyn King has warned.

His comments came as the Bank lowered its economic growth forecast, and said inflation would stay higher for longer than previously forecast.

The Bank now expects the economy to grow by about 2.5 per cent in 2011, down from its previous forecast of about 3.4 per cent.

It also said that a lack of bank lending would limit economic growth.

King said: "It will take many years before bank balance sheets and fiscal positions return to anything like normal.

"In the meantime they will act as headwinds to the recovery."

King also warned that following an "unprecedented" period the UK economy faced a difficult rebalancing "away from private and public consumption and towards net exports", and that this could also hit economic growth.