Bank of England Lowers Forecast for UK Economic Growth

Bank of England Governor Mervyn King said that the U.K. economy will grow slower than previously forecast.

King said that growth may peak at 3% annual pace, rather than the 3.6% rate forecast in May, according to Bloomberg News. Inflation will also be lower than expected, hitting 1.5% in two years, rather than the expected 2%.

"The overall outlook is weaker than that presented in the May inflation report," King said, citing the "persistence of tight credit conditions" and planned budget cuts as potential obstacles to growth.

The Bank of England Monetary Policy Committee, which sets interest rates for the U.K., "stood ready to respond in either direction as the balance of risks evolve," the bank said in a statement.

On Tuesday, the Federal Reserve said it would start buying more long-term government bonds, reversing plans to exit from aggressive monetary stimulus.