Nov 11, 2009, 15:16 GMT
London - The Bank of England offered a cautiously optimistic outlook on the economy Wednesday, saying the process of recovery had begun while an emergence from the recession was still some time off.
The past year had been 'extremely painful' for most economies around and Britain would need 'more than a few quarters' to emerge from recession, Bank of England governor Mervyn King said.
Presenting the bank's quarterly inflation report, King predicted a 'sharp rise' in inflation over the next few months, as the temporary cut in Value Added Tax (VAT) from 17.5 to 15 per cent runs out at the end of December.
King gave no indication that interest rates, currently at an all- time low of 0.5 per cent, could change any time soon, dashing hopes of a rate hike in the last quarter of 2010.
'The big picture is that we have seen right across the industrial world a big fall in the level of output...and it will take a long time to recover that,' King said.
Figures last month showed that the British economy - in contrast to those of Germany and France - actually contracted by 0.4 per cent between July and September.
Also Wednesday, figures published separately showed that unemployment in Britain rose by 30,000 to a total of 2.46 million over the three months to the end of September.
The unemployment rate remained unchanged at 7.8 per cent. The figures by the Office for National Statistics also showed a rise in the number of people out of work for more than a year, and a sharp increase in youth unemployment.
The number of jobless aged between 18 and 24 rose to 943,000, a record high of 19.8 per cent for the age group, the ONS said.
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