Bank to cut growth, raise inflation forecasts

Fourteen of 19 economists in the poll, taken this week, said the central bank would revise down its growth forecasts from the surprisingly upbeat numbers announced in November, with four saying it would be unchanged and one revised down.

November's projections saw growth starting at the beginning of this year, and picking up to 3.75 percent at the end of 2011. But it appears that the Bank has become more cautious on the outlook and economists tend to agree.

"The wording of the recent statement accompanying the interest rate announcement gave the impression that the committee is somewhat hesitant over recovery prospects," said Philip Shaw at Investec.

The bank left rates at a record low of just 0.5 percent this week and put a hold on its 200 billion pounds bond purchase programme, known as quantitative easing, that was designed to boost money supply and support a floundering economy.

But the Bank left the door open for further easing later in the year, saying in a statement accompanying the decision that it would continue to monitor the situation and make further purchases if necessary.

"The bank will have to delicately balance the need for continued monetary policy support to support a fragile recovery and at the same to ensure that the focus on low inflation remains strong," said Amit Kara at UBS.

Economists were similarly convinced about inflation, with 18 saying the profile for 2010 would be revised up from November, one saying it would be left unchanged and one that it would be revised down.

But economists were more divided over how the bank would see prospects for next year.

Seven of 15 said growth forecasts would be revised down, seven said they would be left alone while one said they would be revised up. For inflation, five said projections would be revised up, seven went for unchanged and four said revised down.

The bank said in November that inflation would be below its 2 percent target at around 1.6 percent in two years time but was likely to rise sharply above target in the near term, with risks broadly balanced for the end of 2011.

Inflation accelerated at a record pace in December, with prices rising by an annual 2.9 percent, although largely due to an unflattering comparison with a year earlier.

The economy emerged from its longest recession since the Second World War last quarter at a much slower pace than expected, at just 0.1 percent, and is seen trundling along with growth between 0.4 and 0.5 percent per quarter this year.

(Reporting by Jonathan Cable, polling by Bangalore Polling Unit; Editing by Patrick Graham)