CBI sees some UK recovery

In its latest economic forecast, the Confederation of British Industry (CBI) lowered its forecast for British growth this year to 0.9% from the 1.2% it predicted in November, though this was in response to an economic contraction recorded in the last three months of 2011.

Quarter-on-quarter GDP growth will accelerate from 0.2% in the first two quarters of this year to 0.6% and 0.5% in the last two, the CBI estimated.

"With the economy on a slightly firmer footing but with inflation well under control, we do not anticipate further quantitative easing beyond that which was announced by the Bank of England (on Thursday)," said Ian McCafferty, CBI's chief economic adviser, at a presentation of the CBI's forecasts.

The central bank said last week it would pump another £50 billion into the economy under its quantitative easing (QE) programme, to bolster a renascent recovery and deflect any fallout from the debt crisis in the eurozone, Britain's biggest trading partner.

Consumer price inflation has fallen from a three-year peak of 5.2% in September to 4.2% in December, and policymakers have voiced confidence that it will dip below 2 percent later this year.

The CBI predicted that inflation would fall to 2.2% in the final three months of this year and stay close to 2% throughout 2013.

Economists are divided over whether buying government bonds with newly created money does much to support growth and jobs.

John Cridland, CBI Director-General, told reporters QE had its "trade-offs", but pointed to the central bank's own assessment that QE's effect on inflation in the past had been more than offset by the boost it gave to growth.

"The CBI has never claimed that QE is a silver bullet, never been out there arguing it was the way to stimulate the economy," he said.

"But it's one of a relatively limited number of tools that managers of fiscal policy and monetary policy have collectively," he added.

The British government's hands are tied by its pledge to erase the country's huge budget deficit, and therefore the onus remains on the BoE to support growth.

The CBI said that unemployment would continue rising this year, peaking at 9.1 percent in the fourth quarter from the current rate of 8.4 percent, which is already the highest since the mid-1990s.

Joblessness and muted wage growth would keep a lid on domestic consumption, with economic growth driven mainly by exports and business investment, the CBI said.