Bank of England cuts growth forecasts, warns on euro crisis

LONDON, Nov 16 (AFP): The Bank of England Wednesday cut its forecasts for British economic growth, saying the "single biggest risk" comes from the eurozone debt crisis. Gross domestic product (GDP) is expected to grow by no more than 1.0 per cent in 2011 and 2012, compared with the previous guidance for growth of about 1.4 per cent and 2.0 per cent respectively, the bank said in a quarterly report. "Implementation of a credible and effective policy response in the euro area would help to reduce uncertainty and so support UK growth, but its absence poses the single biggest risk to the domestic recovery," the bank warned. "The prospects for the UK economy have worsened," the Bank of England said after global demand slowed since the BoE's last quarterly update in August. "And concerns about the solvency of several euro-area governments intensified, increasing strains in banking and some sovereign funding markets. "Household and business confidence fell, both at home and abroad. "These factors, along with the fiscal consolidation and squeeze on households' real incomes, are likely to weigh heavily on UK growth in the near term," the BoE said. It added that the worsening economic outlook would help push annual inflation to below the bank's official 2.0 per cent target in late 2012. Britain's 12-month inflation fell to a rate of 5.0 per cent in October from a three-year high of 5.2 per cent in September largely owing to falling food prices, official data had showed on Tuesday. Last week, the BoE held its key interest rate at a record low 0.50 per cent as Britain struggles to ensure economic recovery while crisis grips the eurozone, which is a key trading partner.