Bank may turn off printing presses as inflation drops

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Threadneedle Street thinks inflation will come in just below the Bank's 2% target in two years' time.

This leaves any calls for further quantitative easing looking marginal at best and could herald the end of the unprecedented policy launched in March 2009, which has seen the Bank pump £325 billion into the economy.

The inflation report also predicted sluggish short-term growth, underlining that the eurozone crisis posed the biggest threat to Britain's recovery. But its forecasts of around 3% growth in 2013 still look optimistic, according to Capital Economics' chief UK economist Vicky Redwood.

She said: "We still think that more asset purchases are likely this year. After all, the committee's forecasts for GDP growth still look very optimistic, with the MPC expecting growth to accelerate to about 3% by the end of next year.
"If growth is much weaker, as we expect, then QE is still likely to be extended further this year."

Inflation dropped to 3.6% in January but the Bank's latest forecasts take no account of the potentially calamitous impact of a Greek default or eurozone break-up, which would tip Britain back into a deep recession.