BoE likely to trim growth view

London, Nov 15 | Updated: Nov 16 2005, 05:30am hrs
The Bank of England is likely to trim its economic growth forecasts on Wednesday and may shave its inflation outlook, although few people expect the central bank to signal it is poised for an imminent interest rate move. Most economists expect the BoE to follow Augusts quarter point rate cut to 4.5 percent with another next year, based on disappointing growth since then and a continuing threat that household spending could weaken further.

But many analysts also reckon that forecasts in the banks November quarterly Inflation Report on Wednesday wont look that different from those it drew up three months ago. Financial markets have already been considering the prospect that rates could rise next year, not fall, so it will take a hawkish set of forecasts to make rate hike expectations climb any further. But there were signs on Tuesday that an expected rise in inflation further above the BoEs 2.0% target may have already passed.

Annual growth in the consumer price index eased in October for the first time in more than a year. Three months ago the bank predicted in its last report that inflation would be slightly above target at the 2-year horizon and it saw a strong rebound in growth in 2006. The medium-term outlook for CPI will depend heavily on the central banks growth forecasts, which in August looked extremely optimistic to us. We expect these to be revised down, said David Page, economist at Investec in London. Todays inflation release should help allay some of the short-term inflation concerns. This showed cheaper petrol helped to lower annual inflation to 2.3% from a record 2.5% the month before.